Money Saving Strategies for a Cheap Auto Loan

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - March 4, 2019

It’s possible to get a cheap auto loan, but you may have to save up some cash to get one. Finding a cheap car can be tough, so make sure you save up some money ahead of time before heading to the dealership.

How to Get a Cheap Auto Loan

What determines a “cheap” auto loan depends on your current financial situation, how much cash you can set aside, and your credit score. If you have good credit, and can afford a newer used car, you most likely can qualify for a shorter loan term at a lower interest rate than someone with bad credit who struggles with money issues.

Besides saving money and practicing good spending habits, you need to build a solid credit history to get a cheap auto loan. The good news is that by saving up extra money, you can increase your credit score and build a good credit history. The key is to pay all your bills on time and keep up with good saving habits.

Financing a Cheap Car Loan

If you’re looking for a car that’s under $5,000, less than 10 years old, and has under 100,000 miles, you might be reaching for the stars. Subprime lenders aren’t going to finance a vehicle that’s under $5,000, and even if you do find a car that’s under 5K and meets the age and mileage you’re looking for, you could end up paying for more in repairs – which can make it even more expensive to keep the vehicle running.

The best way to finance a cheap auto loan is to save money ahead of time to use toward a down payment. A down payment is required when dealing with subprime financing. The minimum amount needed varies by lender, but you can typically expect to need $1,000 or 10 percent of the cars’s selling price, whichever is less. The more money you put down, however, the cheaper the overall cost of the auto loan.

For example, let’s say you want to finance a vehicle worth $12,000 for 60 months, and you have an interest rate (APR) of 18 percent. Here’s how different down payment amounts can make your car loan cheaper:

Down Payment Amount Monthly Payment Total Interest Paid
$1,000 (Typical minimum required) $279 $5,760
$1,200 (10%) $274 $5,655
$1,800 (15%) $259 $5,341
$2,400 (20%) $244 $5,026

Keep in mind that if you have a trade-in with equity, you can apply that toward the down payment requirement, too. You don’t have to just use cash, you can use trade equity, or a combination of both.

Need a Cheap Auto Loan but Have Bad Credit?

If you’ve been saving money for a cheap auto loan, but your credit still isn’t the best, let CarsDirect help you out. While we can’t provide financing, we help you get connected to a local dealership that has the lending resources to handle various credit situations. To get the process started, simply complete our car loan request form for free today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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