How to Save Money on Your Auto Loan
Some people purchase cars for cash to own them outright and avoid taking out loans. However, that isn’t always in the cards for everyone. New and pre-owned vehicle costs are almost out of hand these days. For example, according to research, the average price for a used ride was $28,205 when 2021 came to a close. Meanwhile, people who bought brand-new autos off car lots or showroom floors spent around $37,876 across the United States in 2021.
With such high-dollar expenses, it’s easy to see why people need auto loans, but before you sign on with just any bank, credit union, or lender, you’re going to want to make sure you’ll be getting the best deal. So, use these tips and tricks to learn to save money on your auto loan.
- 1. Consider Refinancing an Existing Auto Loan
- 2. Check and Improve Your Credit Score
- 3. Shop Around for Car Loans
- 4. Save a Large Down Payment
- 5. Round-Up Those Payments
1. Consider Refinancing an Existing Auto Loan
Did you already get financed for a car? If that’s the case, all may not be lost if you didn’t get a stellar deal. You can perform a quick refinance auto loan search and find a company to help you in case you need it.
That could save you money by lowering your interest rate. Then, you won’t pay as much all the way around. Of course, you could also refinance for a longer period. That can drop the price of your monthly note, leaving you with more cash in your pocket.
2. Check and Improve Your Credit Score
If car shopping is on the agenda soon, you should probably check your credit score first. There are various online platforms to complete this deed and see where your numbers stand. Consumers can buy vehicles with poor credit, no credit, or excellent credit. However, to save money, it is best to have a score of around 700.
People with credit scores between 650 and 699 often receive rates double what top-of-the-line borrowers obtain. Then, as for those with scores that fall between 450 and 659, their interest rates can be up to three times higher than those with good credit.
Therefore, if you discover your score has dipped below 700, think about improving the number before applying for an auto loan, as that could save you quite a bit of money. There are various ways to improve one’s credit, including:
- Paying bills on time
- Paying down balances
- Paying off debt with debt collectors
- Limiting new lines of credit
3. Shop Around for Car Loans
There are different ways to get auto loans, and gone are the days when consumers just showed up at dealerships and expected the employees to get them approved for financing. Now, people can shop around more easily than ever, and they can do it on their own, thanks to the internet and smartphones. Hence, if you have those resources, save some money by getting multiple quotes and comparing rates offered by different lenders.
4. Save a Large Down Payment
The more money you can spend on your car upfront, the better off you’ll be. When people finance large auto loans, they repay way more than they borrow because of interest. Therefore, if you don’t want that fate bestowed upon you, the time to start saving is now. Put some cash away whenever you can for a down payment. Every little bit here and there will help.
Then, when you eventually have the amount you want, head to the car lot to get financed. However, do yourself a favor and avoid telling the employees how much money you’re working with because that could get you taken advantage of.
5. Round-Up Those Payments
How much do you spend on your car payment each month? Is it an uneven number, like $325.93? You can always pay the bare minimum and get by without any problems, but there is also another solution. When you’re able, round up your payments to $350 or even $400.
Be sure to discuss this matter with the lender first, though. You’ll want to make sure the extra money is going toward the loan’s principal. Instead of paying your loan off early, all you might do is extend the term limits if the amount doesn’t go to that.
The Bottom Line
Many people rely on auto loans to purchase new and pre-owned vehicles. The financing helps them obtain the vehicles they need to go about their daily lives. However, even though you might need a car loan to buy a vehicle at some point, you likely won’t want to overpay when it comes to repaying it. So, use these tips to save money and ensure you don’t encounter financial issues or monetary woes later on.
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Updated: April 4, 2022 by FinPins