Best Auto Loans - Car Financing Rates:

Everyone will be in the market to buy a new or used car at some point in their life. Therefore, understanding car loans and how financing works will help you negotiate the best rate for your situation when the time comes. Bankrate.com offers an excellent auto loan section on their site with the latest car loan rates (36 month, 48 months, 60 months, 72 months, etc) and auto loan calculators and lease vs buy comparisons. With all the currentn zero percent APR offered by major manufacturers like GM, Ford, Chevy, etc. you might think why worry about financing when it's free. That's not necessarily true. In order to get zero percent financing you need great credit and usually the loans are only for 36 months which drastically increases your monthly payment. I recently bought a Chevy Tahoe and was able to get the 0% APR deal, but my payment was almost $1000/month for 36 months. If loan payments like that are beyond your budget, consider a loan through your local credit union over 5 years and reduce your monthly payments to a reasonable amount. Sure you may pay more interest over time, but the payment will be low enough that you don't have to worry about defauting on the loan.

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When it comes to car financing rates, we already mentioned the 0% deals offered by dealerships across America. If you go with a local bank, it seems that credit unions have the best rates on the markets compared to larger banks like Wells Fargo, Bank of America or Washington Mutual. Often the difference can be 1% less and when you are talking 4% or 5% over 5 years, you can save lots of money. With 7 out of 10 new cars and trucks being financed, you really need to know the numbers before you buy anything. Getting pre-approved at your local bank or credit union is a good idea, that you can avoid the backroom financing agreements that dealerships are notorious for having and confusing buyers on how much they will pay. They often gloss over the interest rate with lower monthly payments or no down deals. A bank or credit union should have better customer service and someone who will walk you through the loan process in a way that makes sense and highlights the pluses and minuses involved. Everyone has a different financial situation and therefore different loan rates and terms make sense for different people. One other option for obtaining a car loan is through a home equity line of credit. You will probably get a better rate that way, but in the same breath you are putting your house up to get your car and that could turn bad. We would say stay away from this option if at all possible. Consider selling your current car through the private market first to get a better price. Sure, dealers will buy almost any used car, but the price they give you will be much lower than what you could get on the fair market. Don't believe what they say when "offering trade-in deals". A recent situation arose with my Tahoe purchase, the dealer offered to buy our 4-Runner right then and there for $7500. I told them no and was able to successfully sell it for $10,500 2 weeks later. Don't get pressured into a trade-in that never works in your favor. The average 48 month car loan these days is at 6.93% on Bankrate.com. 60 month car loans are 6.92%.

Bad Credit Car Loans - Can I Still get a Good Rate:

You can always get financing when buying a car, but depending on your credit score, you may end up paying 25% interest (when 6-7% is average). TheAutofinder.com specializes in finding cars for people with bad credit or credit problems. Even if you have previous bankruptcy filings or repos. Your car loan will still depend on 5 things - your ability to pay the money back, length of employment, time at residence, credit history and the value of the car you are purchasing. Again, stay away from direct loans from auto dealers, they are in the business of selling cars, but not in the business of getting you the best auto loan rate. We suggest working with your bank or credit union and go with a payment plan where payments are automatically deducted each month from your account. That way you don't have to worry about writing checks each month and the bank is assured of getting the money as long as you have the funds available. Expect to pay at least double (14%+) on a car loan when you have bad credit history. The short answer to all of this is, yes you can get a car loan even with bad credit problems.

New Car Loan vs Used Car Loan

Interest rates on new car loans are almost always lower than rates you will find for used car loans. You can also get them over a longer period of time for new cars. If your credit is really good, then you may even get the 0% APR deals on select cars. Dealerships need to move the latest inventory and they will do whatever it takes to get you in a new car versus a used car. The markups on new are in their favor and it's easier to sell a new auto versus old. Most used cars are bought through 3rd parties, but more and more manufacturers are getting into the "certified pre-owned" cars to make money. Right now the market is in favor of the buyer in the used car arena since so many people are buying new cars with all the financing deals offered. Therefore, the used car market is flooded with certain models and owners are forced to be very price competitive in order to get rid of them. Ultimately it's better to buy a quality used car versus a new car, but it's still personal preference. Shop around and get at least car loan quotes before making a decision.

Car Loan Calculator:

A good car loan calculator will let you figure out what is the best type of loan to get. Low APR? Cash Back? We feel that the auto loan calculator on Edmund.com is the best we've seen. They offer basic loan information and let you calculate in vehicle sales price, sales tax (if any), customer cash rebate, cash down payment, trade-in value, market finance rate, and finance terms. Figure out a monthly payment for your car that you can afford. I really like the Low APR vs Cash Back calculator they have where you can do a side by side comparison of each offer to see which one works out better over the long run. You can also do a auto lease calculator or a buy/lease car loan comparison. Leases are usually ok if ownership of the car will be less than 3 years. Otherwise you are better off going with a low financing rate and buy the automobile.

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