Car Loan Rates

Car loan rates are determined with a number of factors. Once you understand what goes in to determining loan rates, you will be better equipped to make an informed decision. Here is what you should consider.

Most people already understand that their credit rating is the biggest determining factor when it comes to car loans. But few people understand what is actually on their credit report. Knowing what your credit rating is before you start car shopping will make it much easier for you in terms of financing. Be armed with the credit reports from all three of the credit bureaus. The rating can vary based on which bureau or service is used at the time of financing. A simple mistake on a credit report can cause your rating to be lower, so knowing about this beforehand will help you fix the situation. If you've disputed any items on your credit report, have proof of the dispute available when you go to purchase your car. 

Many people don't realize that the overall amount of the loan will also affect the financing on the car. If you are looking for a cheaper car, you can expect the car loan rate to be slightly higher. The finance company is wanting to make money on your loan, and with a cheaper car you will likely pay the car off much sooner, meaning less money in the pocket of the bank. Along the same line, a car that is a luxury will likely end up costing more in the end. Since luxury cars aren't purchased as often as standard family vehicles, the bank realizes they can make more money on that purchase.

Loan Term

If you are looking at a car that has to be financed for a longer term, like 5 or 6 years, you can expect the rate to be higher. The convenience of lower monthly payments will end up costing you a little more with the finance rate. If you can shave it down to a 4 year term or less, you can expect to see a 1 or 2 point drop in the loan rate.

Car loan rates are a very important aspect of a car loan. Some rates are fixed and some rates can change over time costing you unexpected payment increases or decreases. Because of this, it is very important to thoroughly understand the rates in your car loan contract. Knowing your car loan rates will keep you from signing something that will cost you extra money over time. Getting the best car loan rates can save you hundreds of dollars a year. In this section we provide information on how to get the best rates, what rates you can expect, and how to avoid bad car loan rates.

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