Comparing Auto Loans

Richard Barrington
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

Comparing auto loans can save car buyers as much money as shopping around for a car. It's not just that auto loan interest rates can vary, but there are other expenses, terms, and conditions which can affect the overall cost. A car payment calculator can help car buyers sort out the differences as long as they know what to look for. There's a thrill of excitement that goes along with buying a car, a rush that takes people back to the first time they ever slipped behind the wheel. There's no such buzz associated with shopping for auto loans, but perhaps there is a trade-off: a person who does his or her homework on an auto loan may very well be able to afford a more enjoyable car.

Your Friendly Neighborhood Dealer

For most people, shopping for an auto loan begins and ends at the same place: the dealer where they purchase the car. There is a blind assumption that this dealer will magically provide the most competitive auto loan interest rate and terms, though in reality it is simply the convenience that causes many people to get their auto loans through their car dealers. It makes sense to consider dealer financing, but only in comparison with other lenders.

Some dealers get incentives when buyers finance through them, so they might offer an extra discount on the price of the car in return. As tempting as this discount might be, a buyer won't really know what it is worth till the dealer's loan terms are compared with those available from other lenders. Shopping around may reveal lower auto loan interest rates. If so, the buyer should run a comparison with a car payment calculator to see if the discount on the car is worth paying a higher interest rate.

Speaking of auto loan interest rates, many dealers lure buyers in with financing deals such as "no interest till next year."  These can represent valuable savings, but buyers should beware that there can be a difference between the phrase "no interest till next year" and "pay no interest till next year."  The first is a good deal; the second may actually be more expensive than regular interest payments.

The Fine Print

Using a car payment calculator can also help buyers sort out differences buried in the fine print, such as fees and insurance. Factoring these in alongside interest rate differentials will reveal whether the lowest rate is really as low as it seems. Again, no one said this would be fun, but saving money might turn out to be a thrill of its own.

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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