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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 providing you with interactive tools and financial calculators as well as publishing objective and original content. We also allow you to conduct your own research and compare data for free to help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that pay us. This compensation could affect how and where products appear on the site, such as such things as the order in which they may be listed within the categories of listing in the event that they are not permitted by law for our loan products, such as mortgages and home equity, and other products that lend money to homeowners. But this compensation does not influence the content we publish or the reviews you read on this site. We do not contain the vast array of companies or financial deals that may be accessible 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 prior to that as a digital content strategist. Since then, she's been featured in a variety of top financial publications 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 from 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 auto and small business loans.









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Preparing to buy a car in the beginning could be one some of the more stressful situations available. With so many aspects to think about when buying a car to consider, the loan could fall by the side. Don't let it. It isn't easy to find a loan -and the more you can do now and the more efficient your financial situation will be in the future. An interest-free rate can be the only way to a low-cost car no matter what you end up buying. 1. Be truthful about your budget. The main concern when you purchase a car ought to be the price. Weigh how much you will spend each month, and the total interest that you will pay to . But you should also consider the -- expected maintenance of the vehicle, fuel and insurance all factor into how much you pay. Experts suggest not spending less than 10 percent of earnings on a car. Make use of an app to estimate the amount of monthly payments and the total amount paid. You can then look up resources such as Edmunds and Kelley Blue Book to see what you can expect to be able to pay for the vehicle you're considering buying. The most important thing to remember is
Review your financial situation and decide if you are not stretching your budget too far.


2. Keep in mind that longer terms are a higher cost The average vehicle is increasing. It's easy to find an loan that lasts six or seven years, but they have a major downside. A longer loan duration does mean that you pay less monthly- which could be helpful when you're on a tight budget -however it will result in more interest paid overall. Even if you purchase an inexpensive car and you are able to get it, you could soon be debt-ridden or owe more than the car is worth. For the first time you take out a car loan opt for the shortest period you can reasonably afford each month. It could mean you need cut back on some other ways, however it is by far the most secure option to avoid owing more on your car than it's worth. It is the most important lesson to take away
It's likely that you'll save money on interest rates by choosing a short loan duration as well as reduce the chance of becoming upside down on your car loan.


3. Examine your score on credit reports and credit scores. Your credit score is the primary factor lenders consider when determining your interest rate. In order to get a fair rate, you'll need excellent credit. Additionally, you will require a history of punctual payments. If you haven't been able to establish your credit score and history and history, you'll have a tough to find a great deal. There may be a need to apply this, which can mean an interest rate that is higher. But if you can wait for your vehicle loan make sure you create a record of punctual payments. A low debt-to-income ratio also lets lenders know that you're able to handle your financial situation. Create a positive financial picture for lenders to get an excellent deal. The most important thing to remember is
Make an effort to improve your credit score before applying to get an attractive interest rate in the auto loan.


4. Find with more than one lender Comparing lenders is the same as comparing car prices for a great bargain. There are a variety of lending options to choose from. include: If you've got a low to no history of credit you could be eligible for a first-time car buyer's program by local credit unions. You'll have to be a credit union member in order to qualify for loans and other financial services, so ask about ways to join before making any moves. Big banks: Customers who have an existing relationship with a traditional bank may be eligible in the auto loan. As a first-time buyer, you may face higher interest rates. The online lenders typically offer less stringent criteria for eligibility as compared to traditional lenders. This is a good thing for those who do not have credit history or a high score, but you can expect a higher rate of interest to offset the 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 can see potential loan deals with lenders that may be a suitable match. Capitalist lenders could also secure financing through a or finance company that is part of the auto maker. They often feature auto loan programs specifically for currently enrolled students as well as recent graduates of college. Every lender has different rates and ways of determining who is eligible for what terms. It is crucial to compare rates and apply with multiple lenders. This lets you see the loan you are eligible for, how much you can spend and what you can expect to pay every month. Key takeaway
Doing some research will help ensure that that you receive the top price on auto loan.


5. Preapproval is a must. additional benefits that is it could end up with a period of for up to 30 days. If you apply for preapproval, the lender creates a soft inquiry that won't affect your score on credit. You'll be able go to the dealer and test 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 gain a profit. If you visit the dealership with a preapproval letter, you may be in a position to negotiate a great deal on in-house financingshould that be the way you'd like to go. Some dealers also offer the option of either low-interest or financing. If you've managed to secure the best rates from another lender the option is simple: reward yourself with a rebate. What's the most important takeaway
Preapproval helps you narrow down the list of lenders you could consider and minimizes the effect on your credit score.


6. Decide between new, used or leased Lenders provide different rates on automotive loans for . Lessors use their own method to calculate the monthly installment which is known as the factor rate and it is important to study the factors prior to taking this decision. If you are planning to purchase it, remember that new cars generally have lower rates across the spectrum. However, brand new vehicles are also more expensive and decrease in value more quickly due to depreciation. So, while you may have to pay higher interest rates for a used car, you may still save money. Key takeaway
New cars typically come with more affordable loan conditions than used vehicles however, your total cost will be more expensive.


7. Check out manufacturer specials Most automakers offer first-time buyer programs. Some offer discounts for college students and recent graduates. If you're planning on purchasing a car for the first time or have the money as well as credit score to back it up and want in-house financing it is sensible to check if you could save a few dollars. Manufacturers can also offer rebates and leases with special terms on new models. Keep an eye out for these. There will be a limit to what you can buy and the amount you can pay for it. However, if you have a clear picture of what you want and have excellent credit, the manufacturer specials can save you money on your first auto loan. Key takeaway
Check with the dealer to see if you qualify for financing incentives if you're buying a new car.


8. Use a co-signer or co-borrower If you don't have great credit, you might have a chance of getting a bargain. The lender will look at both credit scores when deciding whether to finance your car. The vehicle is liable for the loan when you fail to pay on time. But, a co-borrower has ownership of the vehicle and equal responsibility for this loan with you. No matter which option you pick the person you choose to borrow from, they must be able to demonstrate excellent credit and a steady source of verifiable income that is in line with the lender's minimum requirements for approval. What's the most important takeaway
A co-signer or co-borrower can improve your odds of approval and enable you to secure the best deal on the car loan.


9. You should have a substantial down payment Once you know how much you can spend to start, make sure it's at least 20% of the car's total cost. If you're not able to pay this amount, try to make a down payment of at least 10% -or whatever you are able to manage to afford. Consider using Bankrate's to find a figure that works for you. It may be tempting to buy the most expensive car for first-time car buyers, but all first-time car buyers -- and every car buyer need to make a downpayment to lower the amount they have to finance. A bigger down payment can increase your chances of a good interest rate, reduces the amount you pay each month and reduces the interest you'll pay during the loan's term. What's the most important takeaway
A larger down payment could make you eligible to receive better loan conditions, and your monthly installment will be lower.


Next steps The key to getting a good deal on your first auto loan is to stay open to shopping around and be patient. You can get an affordable rate by comparing lenders, saving up a down payment, and working on your credit score. Find out more


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Written by

Allison Martin's work began over 10 years prior to that as a digital content strategist, and she's since published in numerous prestigious financial media outlets such as 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 the end of 2022. He values clear reporting that helps readers easily get deals and make best choices for their finances. He specializes in small and auto loans.











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