Tips to Get Easy Auto Financing
Posted Tuesday, Jun 27, 2023
If you have bought a pre-owned car before, you know how it works. You found the car you wanted to get; haggled the price; and settled for the trade-in amount; and the auto financing option. But, what if we told you that there was a way to get easy auto financing when you purchased a pre-owned car from a dealership?
What is a Good Interest Rate for Auto Financing?
It is important to note that interest rates are going to vary depending on the credit score and the amount of the loan, along with a number of other factors. That being said, it is possible to get better rates if you have maintained your credit history and have a decent credit score.
Finding a good auto loan helps since it allows you to finance a car with monthly payments that are manageable and fall within your budget. In case you were wondering, here's a quick breakdown of the interest rates that you can expect to pay when buying a used car.
Here, deep subprime ranges from a credit score of 579 and lower; subprime ranges from a credit score of 580 to 619; nonprime ranges from a credit score between 620 and 659; prime ranges between 660 and 719, and super-prime starts at a credit score that's 720 or above. Here's what to expect depending on your credit score;
- Deep Subprime - 20%
- Subprime - 16.85%
- Nonprime - 10%
- Prime - 5.50%
- Super Prime 3.6%
Shop Around
It is important to remember that not all lenders or in-house dealership financing options will be the same. This is why you need to get quotes from multiple lenders and preferably from both in-house dealerships and third-party lenders to find and compare the best rates.
Improve the Credit Score
Your credit score is an important factor that is going to determine your APR, but even if you are opting for in-house financing from a dealership that doesn't require a stellar credit score, it still pays to do everything you can to improve your creditworthiness. For instance, if possible, pay off any outstanding debts or payments that you may have, and ask for a credit history report so that you have a better understanding of the areas you need to improve to get a better credit score.
Bump Up the Down Payment
While the whole reason for you to choose auto financing is so that you can pay less cash up-front, it pays to try and make a higher down payment towards the vehicle. This is mainly because the risk is a key factor that is considered by both banks and in-house dealership financing departments.
A larger loan amount means a longer term, which translates to more risk while a smaller loan amount will result in shorter loan repayment time and reduced risk. An auto loan that needs to be repaid in three years will get you a better interest rate as compared to one that lasts for four years. In other words, you will end up paying less over the repayment timeline of the loan.
Consider a Co-Signer
If you have a credit score that's bad or non-existent you might want to consider a co-signer. This will improve your credit standing, getting you a more affordable interest rate. Furthermore, if you add a co-signer to the mix, you will be piggybacking on the co-signer's credit score so make sure that their credit score is much better than yours and not lower.
Additionally, your co-signer will also be responsible for making the loan repayments should you fail. Adding a co-signer may be a good idea if you are looking to pay off the loan quicker and not have your car payments hovering over your head for years like a double-edged sword. Zero percent financing options are available for those who have a high credit score, but it also means a shorter term and having to make monthly payments that are higher as compared to regular auto loan payments.
Opt-Out of Opt-Ins
Just because you've found the perfect car for your needs does not mean you’re home-free. You will still need to get the price down on your car financing. One of the areas that buyers normally don't focus on is the plethora of add-on options that are usually offered by a used car dealership. While these fancy packages and upgrades can be tempting to some buyers, it is important to note that these small add-ons can very quickly add up to the overall monthly payments.
If you are already on a budget, then a good rule of thumb will be to not get swayed by the fancy gimmicks, upgrades, and other added services. This goes for extended warranties, protection plans, and gap insurance options as well.
Before opting for these "value-added" services you must ask yourself whether or not a particular add-on is needed. Furthermore, most of the add-ons that are offered at the used car dealership can be purchased by third-party providers at a later date, which will keep you from having to make higher monthly payments for features and upgrades you do not need.
When buying a used car it is important to remember that the more you add on to the vehicle, the higher your monthly payments are going to be, which also means you will have to take out a larger auto loan.
Buying a used car is a major purchase that you won't want to regret after you've signed on the dotted line. With easy auto financing options just a click away, you can head on down to a reputable platform such as Caspian Sea Auto Sales LLC to find a large inventory of pre-owned vehicles, along with some great financing options.
