Spend a few minutes online searching for auto loan quotes and you will quickly discover that there is an overwhelming number of options. When dealing with any kind of choice, the first step is to be able to separate the good ones from the bad ones. This isn’t always easy.
Here’s an example. I get a letter almost every week from the bank that holds my home mortgage. They tell me that I can save up to $4000 a year if I refinance. Well, that sounds pretty good to me. I’d like to say $4000 a year. What they don’t tell you is that you have to pay the cost of refinancing the loan. But the worst part is when the loan gets refinanced, it extends back out to 15 years or 30 years. I have 10 years left on my mortgage. If I refinanced it to say $4000 a year, I’d end up with a 15 year loan again. But by the end of the 15 years, I spent a lot more than $4000 in interest.
The moral of the story: be careful and do your due diligence.
The Most Important Secret to Getting Good Auto Loan Quotes
The best way to get a good loan is to be patient. You want to shop around and get as many quotes as you can to increase your chances of finding the sweet deal. However, if you are anxious to get a loan right away or you are sitting in front of the car salesman under lots of pressure, you are likely to make a hasty decision. If you know you want to buy a car, qualify yourself for a loan first before you even set foot on the car lot.
Don’t Live Beyond Your Means
This is a no-brainer. Don’t buy more car than you can handle. Don’t just buy a car because the salesman says he can get you a low monthly payment. You should be paying attention to the overall cost of the car, not just the monthly payment.
Try this strategy. Ideally, you want a four-year loan. Five-year loans are really popular, but really they are just a ploy to sell more cars to more people who can’t really afford them. Take the sticker price of the car you want and plug it into a monthly payment calculator at an interest rate that you think you are likely to qualify for. If you can afford the payment, then you need to keep looking for a car that is not so expensive.
The bottom line is you want to start searching for a loan well before you set foot on the car lot to purchase the car. Only in this way are you going to be able to see all the choices that are available to you and ultimately choose one that is the best and most reliable for you.