| If you are in the market to buy a car you will find that the average interest rates for used cars can be very different depending on your credit score, geographic location and price you are paying for the car. Different lenders will also offer different rates. With all of these factors coming into play when you need a loan, it pays to shop around and talk to several lenders before making your decision when looking for the best auto loan deal.
If you have a high credit score you will qualify for the best interest rates for used cars. Having a high credit score makes you seem less of a risk to whomever lends you the money to buy your car. a good credit score is considered 720 or better and will qualify you for the lowest rate on your car loan.
An excellent credit score like this will give you more negotiating power with the dealer as well, especially if you plan to apply for dealer financing. Most dealerships, however, will attempt to offer you a higher rate than what a bank would offer you. Keep in mind that the lower the interest rate you get on the loan you take out, the lower the payment you have to make each month will be. With rates constantly changing you should check with the bank or lending institutions you are considering using to see what the average rate is at the time. My research showed that at this time a good rate is about 7 percent on auto loans, according to CarsDirect. But, depending on your credit score, you may be able to lock in a lower fixed rate.
Credit unions are not popular for granting auto loans, about 20% nationwide, but if you belong to one, you may find you can get an even lower rate than at a bank. The National Credit Union Administration reported in 2009 that credit unions were offering loans at 5.4 % as compared to the almost 7% by banks. Other ways you can negotiate a lower interest rate when you finance the purchase of a used car are:
1. The price of the vehicle. The smaller the price tag on the car you choose, the lower the rate of interest you will pay.
2. Opt for a shorter loan term. Your monthly payments will be a little higher, but you will pay less interest over the course of the loan.
3. Make a sizable down payment. By this I mean save some money until you can put down at least 20% of the price of the car. Buying a used car might not necessarily save you the most money but in this economy when people are holding on to what they have got, if you find a good one and put just a little money into it when you buy it, a good used car can save you money. The average age of any car the average household has these days is ten years old. So, shop around carefully for the best interest rates for used cars. |