Useful tips in getting the lowest new car loan interest rate

Most car buyers are concerned about new car loan interest rates before they purchase their vehicles. The interest rate is important because it helps determine the actual amount needed to pay for the vehicle. Although purchasing a car on cash basis is a good option, most buyers prefer to purchase through a loan since a car depreciates faster each year.

Factors affecting the interest rates

There are several factors affecting the interest rate of the loan. New car interest loans for example are based on the prime rate from the federal government. This rate may rise and fall depending on the situation of the economy of the nation. Due to this, getting the lowest interest rate for new car loans should be accompanied by proper research of the existing prime rate. In case you are planning to purchase a new car through a loan, you should patiently wait for the prime rate to go down. It is on this situation where the banks and other lenders offer low interest rates for the loans they provide.

In addition to this, the loan term also affects the interest rate of the loan. Long term loans have higher interest rates compared to short term loans. Given these factors, you should watch out for the prime rate to go down and go for a short term loan in order to obtain the lowest new car loan interest rate.

Provide a higher down payment

Providing a higher down payment for a car loan reduces the monthly payments involved as well as encourages the lender to provide lower interest rate. Through this you would be paying lower monthly premiums and get the chance to pay the loan off in a shorter period.

Most new car dealers also offer 0% interest rates to car buyers. However, these deals usually require higher down payments of up to 50% or 70% of the car’s price. This situation makes 0% loans less favourable to average car buyers. In case you are an average buyer the best thing to do is increase the amount of down payment on a regular loan.

Maintain a good credit score

Finally, the credit score is also an important factor in calculating the interest rate of the loan. A higher credit score allows you to have lower interest rate. Lower credit score on the other hand means higher interest rates. Given this fact, it is important that you maintain a higher credit score in order to obtain lower interest on a new car loan. Make sure to pay your existing loan premiums on time for this allows your credit score to improve.

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