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9 tips to get a good deal on your first auto loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive tools and financial calculators, publishing original and objective content. This allows users to conduct research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site are from companies that pay us. This compensation can affect the way and when products are featured on this site, including such things as the sequence in which they appear within the listing categories in the event that they are not permitted by law. Our loans, mortgage,, and other home lending products. But this compensation does have no impact on the information we provide, or the reviews that appear on this website. We do not contain the entire universe of businesses or financial deals that may be open to you.



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6 min read published September 30 2022
Written by Allison Martin Written by

Allison Martin's work began over 10 years ago as a digital media strategist, and she's since been featured in a variety of top financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.







Editor: Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since the end of 2022. He is a fan of the clarity of his reporting, which helps readers easily land deals and make the best choices for their finances. He specializes in small business and auto loans.









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Making plans to purchase a vehicle for the first time is likely to be one among the toughest events out there. With so many aspects to think about regarding the actual car, the loan may fall by the wayside. Don't let it. Finding a car requires a lot of research- but the more you can do now you do, the better off your financial situation will be in the future. An interest-free rate can be the most important factor to a low-cost car regardless of the car you decide to purchase. 1. Be truthful about your budget. The main concern when buying a car should be the price. Be aware of the amount you be paying each month as well as the total interest that you will pay to . However, you must also take into account the maintenance costs you expect to pay for as well as insurance and fuel costs. All factor into how much you pay. Experts advise not spending more than 10% of your income on a car. Utilize an estimate tool to calculate the amount of monthly payments and the total amount paid. Check out resources such as Edmunds as well as Kelley Blue Book to see what you could expect to pay for the vehicles you are interested in buying. Key takeaway
Examine your financial situation to ensure that you're not spreading your budget too far.


2. Keep in mind that longer terms are an increase in cost. The price of a car is rising. It's easy to locate a loan that lasts for six or seven years, but they have a major downside. A longer loan period does result in a lower monthly payment -which can be beneficial if you are trying to stay within your budgethowever, it also means greater interest being paid in total. Even if you buy an inexpensive car and you are able to get it, you could soon be , or owe more than the car is worth. When you take out the first time you take out a car loan opt for the shortest term you can reasonably afford each month. It may mean you have cut back on some other ways, however it is by far the most secure option to protect yourself from having to pay more for your car than it's worth. The most important thing to remember
You'll probably save money on interest rates by choosing a short loan term as well as reduce the risk of getting upside down on your vehicle loan.


3. Check the credit score and report Your credit rating is one of the primary aspect that lenders look at when determining your interest rate. In order to get a fair rate, you must have good credit. Also, you'll require a track record of timely payments. If you've not had the chance to build your credit score and track record, you'll have a harder getting a bargain. It could be necessary to pay this, which can mean more interest. However, if you are able to wait for your car loan attempt to establish a track record of timely payments. A low debt-to-income ratio also lets lenders know that you're able to handle your financial situation. Paint a good financial picture for lenders to get an attractive deal. The most important thing to remember is
Improve your credit score before applying for a competitive interest rate in an auto loan.


4. Shop with more than one lender Comparing lenders is the same as comparing car prices if you want a good deal. There are a variety of lending options to choose from. include: : If you've got a low or zero credit, then you could be eligible for a first-time buyer's program through a local credit union. You'll need to become a credit union member in order to qualify for loans, so inquire about the best ways to join before proceeding. Big banks: Consumers with an established relationship with a traditional institution may be eligible in the auto loan. As a first-time car buyer it is possible to pay higher rates. The online lenders generally have less strict eligibility requirements than traditional banks. This is a good thing if you lack credit history or a high score, however, you may anticipate a higher interest rate to cover any risk posed to the lender. Marketplace lenders: These platforms have a vast network of lenders. When you submit an application, it is shared with the network , so you are able to view possible loan offers with lenders who might be a good match. Captive lenders: You may also secure financing through a , or the finance company belonging to the manufacturer of your vehicle. They typically offer auto loan programs specifically for currently enrolled students and recent college graduates. Every lender has different rates and ways to determine who will get the best terms. It is essential to shop around and make an application with a variety of lenders. This lets you see what you can qualify for, how much you can spend and what you will be expected to pay every month. Key takeaway
Doing some research will help ensure that your get the most competitive rate on a car loan.


5. Get preapproved Shopping around has another benefit that is it could end up in a period that can last up to 30 days. If you apply for preapproval, the lender creates an informal inquiry that doesn't have an impact on your credit score. You'll have time to visit dealers and vehicles without the pressure of securing financing. Being preapproved gives you an upper hand in negotiations. Dealer financing is usually costly because dealers mark up their rates to make profits. However, if you go to the lot with a preapproval document and a preapproval letter, you might be able to negotiate a good deal on in-house financing, if that's the route you want to take. Some dealers will also provide the option of low-interest financing. If you have already managed to secure an unbeatable rate with another lender Your option is simple: reward yourself with a discount. Key takeaway
Preapproval helps you narrow down your list of potential lenders and also reduces the impact on your credit score.


6. Choose between used, new or leasing Lenders provide different rates on automotive loans for . Lessors use their own method of calculating the monthly payments -- called the factor rate and it is important to study the factors prior to taking this decision. If you are planning to purchase the latest model, be aware that they typically come with lower rates across the spectrum. However, new cars are also significantly more expensive and are likely to be less valuable due to depreciation. So, while you may have to pay higher interest rates on used cars, you may still save cash. The most important thing to remember
New cars generally come with more competitive loan terms than used cars However, the total cost will be more expensive.


7. Find specials offered by the manufacturer. Many manufacturers offer first-time car buyer programs. Many offer incentives for college students and recent graduates. If you're planning on purchasing a brand new car with a good income and credit to back it up, and are interested in financing through your home is a good idea to check if you could make a profit. Manufacturers also offer rebates, and special leases for new models. Be on the lookout for these. You'll be limited in the items you can purchase and the amount you can spend it. If you have a clear picture of what you're looking for and excellent credit, manufacturer specials can save you money on your first auto loan. What you should take away from this is
Check with the dealer to find out whether you're eligible for incentives on financing if you're buying a brand new vehicle.


8. Use a co-signer or co-borrower If you don't have stellar credit, a could of getting a bargain. The lender will consider both scores of your credit in deciding whether or not to finance your car. A to the vehicle but will become responsible for the loan when you fail to make timely payments. A co-borrower, however, has ownership of the vehicle and equal responsibility for the loan along with your. Regardless of which you select the person to co-borrow with, they should have excellent or good credit and a steady source of verifiable income that is sufficient to meet the lender's minimum requirement for approval. What's the most important takeaway
A co-signer or co-borrower could strengthen your approval odds and enable you to secure an even better rate on the car loan.


9. Make a large down payment. Once you've figured out the amount you'll need starting with a minimum of 20 percent of your car's total cost. If you can't afford this amount, you should aim for a down payment of minimum 10%- or whatever you can manage to afford. Consider using Bankrate's to find a figure that works for you. It may be tempting to buy a more expensive car however, first-time buyers -- and every car buyer -- need to make a downpayment to lower the amount they must finance. A higher down payment increases your chances of a good interest rate, and also lowers the amount you pay each month and reduces the amount of interest you'll have to pay during the loan's term. Key takeaway
A larger down payment could allow you to qualify to get better loan conditions, and your monthly payment will be less expensive.


Next steps The most important thing to do to securing a great deal on your first auto loan is to be patient and shop around. You can walk away with a competitive rate by comparing lenders, putting aside on a down payment and improving the credit rating. Find out more


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Written by

Allison Martin's work started over 10 years ago as a digital media strategist. Since then, she's been published in several leading financial media outlets such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.



Editor: Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since late 2022. He believes in the clarity of his reporting, which helps readers confidently find deals and make the best choices for their finances. He is a specialist in small business and auto loans.











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