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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 mission is to help you make better financial decisions by providing you with interactive financial calculators and tools as well as publishing objective and original content, by enabling you to conduct your own research and compare information for free - so that you can make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies that pay us. This compensation can affect the way and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage, home equity and other products for home loans. However, this compensation will affect the information we provide, or the reviews that appear on this website. We do not contain the universe of companies or financial offers that may be accessible to you.



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praetorianphoto/Getty Images
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 content strategist. Since then, she's been published in numerous prestigious financial media outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.







Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since late 2022. He believes in transparent reporting that allows readers to successfully find deals and make the most appropriate choices regarding their finances. He is a specialist in small business and auto loans.









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Preparing to buy a car in the beginning could be to be one some of the more stressful events out there. With so many things to consider about the actual car, the loan can fall to the side. Don't let it. It isn't easy to find a loan -and the more you can do now, the better off your finances will be later. An interest-free rate can be the most important factor to a car that is affordable, no matter what you end up buying. 1. Be honest with your budget. The main concern when you purchase a car ought to be the cost. Consider how much you'll spend each month, and the total amount of interest you pay to . But you should also consider the maintenance costs you expect to pay for of the vehicle, fuel and insurance all factor into how much you spend. Experts recommend spending no more than 10% of your earnings on a vehicle. Use an to estimate the monthly installments and total interest paid. You can then look up resources such as Edmunds or Kelley Blue Book to see what you could expect to be able to pay for the vehicle you're interested in purchasing. The most important thing to remember is
Review your financial situation and decide if you are not stretching your budget too thin.


2. Be aware that longer terms translate to an increase in cost. The price of a automobile is increasing. It's not hard to locate a loan that lasts for six or seven years, but they come with a big disadvantage. A longer loan duration does mean a lower monthly payment -this could be advantageous for those in a tight financial situationhowever, it also means more interest paid overall. Even if you purchase an inexpensive vehicle it is possible to quickly be debt-ridden or owe more than it's worth. For the first time you take out a car loan pick the most short-term term you can reasonably afford each month. It could mean you need to reduce your spending in different areas but it's certainly the most secure choice to protect yourself from being liable for more on your vehicle than it is worth. It is the most important lesson to take away
You'll likely save a bundle on interest rates by choosing a short loan duration, and you can minimize the risk of getting upside down on the car loan.


3. Review your score on credit reports and credit scores. Your credit rating is one of the main aspect that lenders look at in determining your interest rate. To get a good rate, you'll need excellent credit. You will also need a history of on-time payments. If you've never had the opportunity to improve your credit score or history it will be a difficult to find a great deal. You may have to use this, which can mean a higher interest rate. However, if you are able to wait for your car loan, try to and create a record of punctual payments. A lower ratio of debt to income shows lenders you can handle your financial situation. Create a positive financial picture for lenders to get an excellent deal. Key takeaway
Work on improving your credit score prior to applying to qualify for a competitive interest rate for your auto loan.


4. Find for more than one lender Ccomparing lenders is just as important as comparing cars for a great bargain. Lender types to choose among include: : If you have very little or no credit history, you may be eligible for a first-time buyer program offered by a local credit union. You'll have to be an active member of the credit union to be able to apply for loans So, inquire about the best ways to join before moving forward. Big banks: Customers who have an existing connection to a conventional bank may qualify to receive an auto loan. As a first-time car buyer, you may face more expensive rates. Online lenders: Online lenders typically provide less stringent qualifications than traditional banks. This is good news in the event that you don't have a credit history or a high score, however you should anticipate a higher interest rate to mitigate your risk of default posed to the lender. Marketplace lenders platforms offer a wide range of lenders. Submitting an application shares it with the network so you are able to view possible loan offers with lenders who could be a good match. Captive lenders: You can get financing through , or the finance company of the auto maker. They usually offer auto loan programs for currently enrolled students as well as recent graduates of college. Each lender has different rates and methods of determining who is eligible for what terms. It is essential to shop around and get in touch with several lenders. This will allow you to determine the loan you are eligible for, the amount you are able to spend, and how much you can expect to pay every month. Key takeaway
Shopping around helps ensure you get the best deal on a car loan.


5. If you're preapproved, shopping around offers an added benefit that it will likely end with a period of as long as 30 days. If you apply for preapproval, the lender creates a soft inquiry that won't have an impact on the credit rating of yours. You'll be able to visit dealers and vehicles without the pressure of having to obtain financing. Preapproval gives you the upper hand in negotiations. Dealer financing is usually costly because dealers mark up their rates to earn profits. If you visit the dealer with a preapproval letter, you may be capable of negotiating a favorable deal on in-house financing -, if that's the route you want to go. Some dealers also offer the option of either low-interest or financing. If you've managed to secure unbeatable rates with another lender Your option is simple: reward yourself with a rebate. What's the most important takeaway
Getting preapproved helps narrow your list of potential lenders and reduces the impact of your credit rating.


6. Decide between new, used or leased Lenders offer different rates on auto loans for . Lessors use their own method of calculating the monthly payment known as the factor rate -- and you should investigate the factor rate before you take this step. If you're planning on purchasing it, remember that new cars generally come with lower rates across the board. However, newer cars are also significantly more expensive and decrease in value more quickly due to depreciation. So, while you may be paying more for a used car however, you could still save money. What's the most important takeaway
New vehicles generally have more competitive loan conditions than used vehicles However, the total cost will be greater.


7. Look for specials from the manufacturer. Most companies offer first-time buyers programs. Many offer incentives for college students and recent grads. If you are planning on buying a new car, have the income or credit that can back you up, and are interested in financing through your home is a good idea to see if you can make a profit. Manufacturers can also offer rebates and special leases for new models. Be on the lookout for these. You'll be limited in what you can buy and the way you spend it. If you have a clear picture of what you want and excellent credit, manufacturer specials could make a difference on the cost of your first auto loan. Key takeaway
Talk to the dealer to find out if you qualify for incentives on financing if you're buying a brand new vehicle.


8. Use a co-signer or co-borrower If you do not have stellar credit, a could of getting a good deal. The lender will consider the credit score of both parties when deciding if they want to finance your vehicle. The vehicle is liable for the loan if you cannot make timely payments. A co-borrower, however, shares ownership of the car and equal responsibility in your loan along with your. Regardless of which you select the person to co-borrow with, they should have excellent or good credit and consistent source of income that is in line with the lender's minimum requirement to be approved. What's the most important takeaway
A co-signer or co-borrower can improve your odds of approval and allow you to get a better deal on the car loan.


9. You should have a substantial down payment. Once you've figured out the amount you'll need, start that's at least 20 percent of your vehicle's total cost. If you can't afford this amount, you should aim for an amount of at least 10% -- or whatever you can be able to. Try Bankrate's tool to find a figure that works for you. It may be tempting to purchase the most expensive car however, first-time buyers -- and every car buyer -- should use a down payment to cut down on the amount they have to finance. A higher down payment increases your odds of getting a great interest rate, lowers your monthly payment and shrinks the amount of interest you'll have to pay throughout the loan's duration. What's the most important takeaway
A bigger down payment can be eligible to get better loan conditions, and your monthly payments will be lower.


Next steps The most important thing to do to getting a good deal for your first auto loan is to remain patient and shop around. You can walk away with a competitive rate by comparing lenders, putting aside a down payment, and working on the credit rating. Learn more


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Written by

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



Edited by 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 successfully land deals and make the best decisions for their financials. He is a specialist in auto and small business loans.











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