Car Finance Interest Rates to Watch

When shopping for a car, factoring in the car finance interest rate is an extremely important part of deciding whether or not to purchase a particular car.

In many cases, the dealer interest rate is actually not very competitive. While advertisements may scream about 0% financing, when you sit in the dealership finance office and talk to their finance representative, what usually becomes clear is that in order to qualify for that interest rate, you must have excellent credit-usually a score of at least 680 or higher-and you must be willing to take a very short term on the loan. This means that your monthly payments will be very high, but on the up-side, if you can afford this type of auto loan, then you will have the car paid off very quickly.

Car interest rates at banks and credit unions are usually much more competitive when compared to dealership interest rates. In fact, they are usually at least one point or more lower than the dealership unless the dealership is offering a special short-term interest rate program. Remember, the shorter the loan, the better the interest rate will be, but the average person can rarely afford the high payments that short-term loans require.

Before purchasing a car, shop around to find the best interest rate for your situation. It is always a good idea to talk to your bank or credit union to find out what they might be able to offer you, given your credit rate and what you can afford. With the information, you can go to the dealership well informed and with a greater understanding of what kind of car you can really afford.