Get a Car Loan Best Rate
If you are looking to buy a car and need to take a car loan, getting a car loan best rate is probably very high on your list. However, comparing different offers from different dealerships and lenders, all claiming to offer you a “car loan best rate” can be very confusing.
What Is Definitely NOT A Car Loan Best Rate
Never look at just the interest rate. There are 3 important factors the equally impact the amount of money you will pay: the down payment, the number of payments and the interest rate. A car loan best rate is the one that gets you the car for the least amount of money. All the rest are simply things loans salesmen will say to get you to take their auto loan.
To Know a Car Loan Best Rate When You See It
It can be very hard to compare a 3.9% interest rate with a $5,000 down payment and 60 payments and a 3.5% with a $5,800 down payment and 48 payments: which one offers the car loan best rate?
You have to be able to compare apples to apples and not apples to peanuts, but each bank, dealership and online auto loan company have their different terms – so how can you tell which car loan best rate really is that – the best rate?
Firstly, contact auto loan companies, car dealerships that are offer auto financing and banks. Ask for as much info as you can, including what is the exact effective interest rate of the auto loan that is being offered to you (that is the actual interest that you will pay – not what the auto loan companies advertise).
Also, be sure to write down if the offer is for a limited time only. You don’t want to miss out on a car loan best rate because the best offer expired while you were checking other options.
Get a Car Loan Best Rate
- Take a piece of paper and a calculator or open an Excel worksheet, whichever you feel more comfortable working with.
- Choose 2 offers to compare. It can be any 2 offers and you can repeat this process until you zero in on the offer that actually has the car loan best rate.
- For each offer, write down the required down payment (and any loan fees, if exist), the number of payments and the effective interest rate.
- Now you will need to calculate the present value of your future car loan payments. This means that you will get a number that says “If you were to buy the car today – this is the amount that you would pay.” This way, you will instantly know which offer has the car loan best rate – the one in which you pay less! Simply replace r with the effective interest rate that you were given, and n with the number of auto loan payments that you will have to pay.
- The hard part is over. After you have the present value for each of your 2 offers, add to that number the required down payment and fees that you will need to pay and voila! The lower price is the car loan best rate.
- If you have other offers, you will need to do the exact same calculation for each offer.
It may not be an easy job to research, find and determine the car loan best rate. But the reward is more money in your pocket and the knowledge that you have made the right choice.