When you take out an auto loan, it is easy to end up paying more than you'd like. If all you consider is the monthly payment and whether or not you can afford that payment, then there's a good chance you will over-pay. Here are a few ways to keep costs down and save when taking out an auto loan.
Make a larger down payment
If you can manage to make a larger down payment, then you will not need to borrow as much. And the less you borrow, the less interest you will pay overall. Saving a larger down payment is not always possible. But if you can afford to put off your purchase of a car for a month or two and save even an extra $1,000 towards the purchase, you will save overall.
Apply with a few different lenders
The easiest way to get a car loan is usually to just borrow straight from the car dealer or from the bank they partner with. However, this does not always result in you getting the best interest rate. Before you take out an auto loan, make sure you apply for a loan through at least three different lenders. Try to apply through the dealer, and also through a small credit union and a larger bank. This will give you a variety of offers to consider.
Get your credit score up before applying
The better your credit score, the better the interest rate you will be offered on an auto loan. If you need to buy a car right now, this may not be an option. But if you are not planning on buying for another few months, you should spend those few months working to improve your credit score. Make purchases on your credit card, but then pay off those purchases at the end of the month. Pay your bills on time, and if you see anything on your credit report that you don't think is accurate, ask the credit bureau to change or remove that entry.
Take out your loan for a shorter period
If you can afford the payments associated with a shorter-term loan, take it. You will pay less interest in the long run. For example, it will be more affordable to take out a 5-year loan than an 8-year loan, even though your monthly payment will be a little higher.
There are plenty of ways to save when taking out an auto loan. Try some of the above strategies and save.
