Don't Pay Too Much on Your Loan

When shopping for a car, most of us know that we should haggle over the price at the dealership in order to get the best price. We don't take the first deal that the salesman gives us, and we try to come up with a good price for our car. Many of us fail to get a bargain when it comes to financing our car. We make several mistakes that end up costing us a lot of money. If you'd like to get the best financing deal the next time you buy a car, these tips will help you pay the best rate.

Compare Quotes

Dealer financing can be convenient, but convenience often comes at a cost. A car dealership makes a lot of money from their financing department, and will often charge you more than a credit union, bank, or online lender would if you went directly to them. Before you sign on the dotted line for dealer financing, compare quotes from several lenders. Your interest makes a big difference in what you'll eventually pay on your car loan, you want to make sure that you are getting the best rate!

Pay Attention to Your Credit Score

Your credit score can determine whether you get a great financing deal or a poor one. If you want to get a good auto loan rate, you're going to have to pay attention to your credit score. Get a copy of your credit report. The government allows you to get a free copy of your credit report once a year. Check to make sure that there are no errors. You may discover that one of your creditors failed to report that you paid off a prior loan, someone else's information accidentally got placed on your report, or you are a victim of identity fraud. Send a letter of dispute to the credit reporting agency to get any incorrect information removed. If your credit is lackluster and you don't need a car right away, spend some time trying to improve your credit. Be extra careful about making on-time payments, as this is a large part of your credit score. In addition, pay down your credit cards, as the ratio of debt to available credit also affects your score.

The Interest You Pay is More Important than the Payment!

Auto dealerships often want you to focus on the monthly payment, rather than the amount that you will eventually pay in interest. While you probably have a monthly budget that you will need to stick to, you also need to pay close attention to the interest that you will pay. One way that dealers can help you get lower monthly payments is to extend the time that you pay back the loan in. They might try to give you a six year loan, rather than a four year loan, in order to lower your monthly payment. If you can afford a higher payment with a lower interest rate and a shorter payoff length, take the higher payment. In the long run, you can save a lot of money. Besides, in six years, you probably won't love that car as much as you do now.