How To Save Money On A Car Loan

If you are just a little bit careless, you can waste a lot of money on a car loan. It does not matter if you buy new or used. Just a few simple mistakes can cost you a lot and it is important to be aware of a few things about how car loans work.

The first thing that needs clarification is the fact that the interest rate is not the same as APR. A more realistic view over how much you will be paying back is offered by the APR which includes the interest rate and all the fees that a loan may imply. It does not take much to get fooled by a low-interest rate but a high APR. Always be clear and ask about the APR.

If you want to reduce the interest rate on your loan, it is always recommended to have a larger down payment. Lenders appreciate a higher down payment and may offer a lower interest rate. It will also cause your monthly payments to go down considerably since the interest rate is lower and the borrowed amount is reduced as well. If you are comfortable with larger payments, you can opt-in for a shorter term on your car loan as you will be paying it off faster and you will pay less in interest.

Lastly, whenever you take a car loan, try to avoid mentioning that you want to finance it. Dealers are less keen to offer a discount or negotiate the sticker price if they know you will get a loan. According to their logic, a 5% discount on your car will not make much of a difference on your monthly payments that that is not true. If you plan to put down a larger upfront payment for your car loan, that 5% discount can make a big difference on your monthly payments. Try to negotiate the price first then talk about financing. Getting a better deal should be your priority.