In the previous part, you went through the first two steps of how to get the best auto loan. So far, you have learnt how to pick the right vehicle and how to calculate the amount you should actually pay for the same. By now, you probably know that information is the key. The more informed you are, the better decision you will be able to make. Let’s go exploring the remaining steps.
Step III: Line Up A Lender: Find The Best Rate
The third step is to find a lender offering you the best rates. First of all, it is very important for you to understand that the rate of interest depends on the loan term. The shorter the loan term, the better rates you are likely to be offered. For example, as per a recent survey, the average annual rate for a 3-year loan is 6.97%, for a 4-year loan is 7.04%, and for a 5-year loan is 7.09%. However, this does not mean that you cannot find a much lower rate for the same loan term. It only means that you should not accept an auto loan offer that is charging you a higher rate than this. Go for extensive comparison-shopping and don’t be surprised if you find a lender offering you a five-year loan at only 6.25%. It always pays to invest some good time and effort to do a thorough market research. And anyways, before you buy your vehicle, it is always better to line up a lender.
Step IV: Rebate Vs Low Cost Financing
The next step is to decide which discount you want to go for. In most cases, you will have to make a choice between low cost financing and auto loan rebate. You have to make your choice very carefully because this is your opportunity to save some more money. In order to get a clear idea about it, let me give you an example. Suppose you are borrowing a five-year loan of $18,000 and you have to make a choice between the two loans - the automaker's finance company is offering you a discount rate of 2.9% while the bank is offering you an auto loan at only 6.25%. Now, let’s calculate the amount of monthly payment and the total amount of interest (for 5 years) in each case. In case of rebate, you will be paying only $1,358 as interest and $323 as monthly payment. On the other hand, in case of a bank loan, the total amount of interest will be a whopping $3,005 and the monthly payment will amount to $350. So, in this example, the rebate offer is obviously much better. However, in the real situation, you may find a low cost refinancing, a better option. The point here is that you need to make sure that you do your math.
Doing all these calculations may be quite a bother if you try to do it manually. This is where you will find the auto loan calculator at my website a great help to you. You can use it to compare different amounts and rates, quickly and easily. There are two more steps to go through where you will learn how to settle on a final price and how to make your offer to close the best possible deal for you. Meanwhile, do visit my website for more information on various aspects associated with auto loans.