The majority of people will need to take out some form of car finance when buying a new vehicle. There are a number of different types of loans and finance options available and some are better than others. However, whatever type of finance you opt for, you will need to pay interest. This increases the amount you pay back each month and getting the best car loan rates is something that everyone is after.

Take Care of Your Credit Rating

by Kevin Krejci via Flickr

Those with good credit ratings are more likely to get the better loan rates than those with bad credit. Lenders need to know that they will get their money back and the credit rating is the best way to determine this. Those who are a lower risk are rewarded for their sensible borrowing.

However, it does not mean that by having no credit means you will have a good credit history. You need to have some form of current or recent borrowing on your history and then be sensible with making all payments. Utility bills do help with credit rating but loans and credit cards are considered to be better.

Have More Deposit

By having more of a deposit, you will not need to borrow as much money. This instantly helps to reduce the amount of interest that is placed on the finance and the APR that a lender will charge. The benefit is that by saving up you are proving that you are a sensible person when it comes to money; there is less risk for the lender and one will be willing to offer you the best car loan rates.

Do You Really Need A New Vehicle?

Everyone dreams of the day that they will own a new car but the question is whether you really need it to be brand new? It is worth remembering that the minute you drive it off the lot the value decreases considerably. There are plenty of “like-new” vehicles available that will not lose the valuation so quickly but will still not have the common mechanical problems that older used cars have. Opting for the slightly older cars will help you cut down on the interest added onto the loan as you are lowering the amount you need to borrow.

Look for a Cheaper Car

Not everyone has the time to save up a larger deposit so getting a lower rate is not always possible. Instead of saving a deposit, take out a smaller loan instead; this will automatically help you get a better rate of interest. The best way of doing this is through haggling on the price. Do your research about any vehicle that you want to buy and check the Blue Book; this will inform you of the vehicle’s valuation. You will usually find that dealers and sellers put the asking price higher than the Blue Book and there are people who will pay this. However, make it clear that you know the true valuation and negotiate to get that price or walk away.

No matter whether you get the best car loan rates or not, it is important to make sure that your monthly payments are comfortable financially. Only accept a loan that you are happy with and think about your financial future. Car finance is generally taken out for between three and seven years and anything could change in your personal circumstances over this time. The last thing you want is to default on any payments and find that you lose the vehicle – you will usually still need to pay off the interest added to the loan and will find that getting a loan for another car is much harder.

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