All over the map -- that's a very apt characterization regarding new
car purchase interest rates today. Money is cheap now - 30-year fixed
rate home mortgages are generally still going out under 4% - but some
car loans are really cheap. By contrast, some are double digit. It comes
down to who’s shopping.
Want really good deals? Check the big auto information websites for updates, because every month there are jaw-dropping specials but they change, fast. Right now, for instance, the VOW Antigua is yours for 0% on a 72-month loan -- yep, free money for six years. A Hyundai Santa Fe is 0% for five years. You wanted something, well, different? How about Ford Fusion at 0% interest for 72 months plus $1,000 in a cash bonus?
Right now, several more cars are available on similar deals. But blink and they will be gone. Next month there will be new choices.
Of course you have to qualify for one of those short-lived dealer incentive loans -- almost always restricted to holders of high FICO scores (think 750 and up) - and, incidentally, know these deals are contrived to move surplus iron. That is not to say the cars are the automotive equivalent of orange ties in the men’s wear section. But they have not exactly flown off the lot, and so the manufacturer, with cooperating dealers, has decided to move that inventory with interest rate offers that are outstanding.
Want really good deals? Check the big auto information websites for updates, because every month there are jaw-dropping specials but they change, fast. Right now, for instance, the VOW Antigua is yours for 0% on a 72-month loan -- yep, free money for six years. A Hyundai Santa Fe is 0% for five years. You wanted something, well, different? How about Ford Fusion at 0% interest for 72 months plus $1,000 in a cash bonus?
Right now, several more cars are available on similar deals. But blink and they will be gone. Next month there will be new choices.
Of course you have to qualify for one of those short-lived dealer incentive loans -- almost always restricted to holders of high FICO scores (think 750 and up) - and, incidentally, know these deals are contrived to move surplus iron. That is not to say the cars are the automotive equivalent of orange ties in the men’s wear section. But they have not exactly flown off the lot, and so the manufacturer, with cooperating dealers, has decided to move that inventory with interest rate offers that are outstanding.
You just are not interested, because you have your heart set on a
specific car? For you there are different strategies. Where to start?
Where not to start is the auto dealership, said Jordan Perch, an expert
with DOV.com. He elaborated: “The terms offered by the dealers are
almost always less favorable than those offered by banks or other
financial institutions.”
Of course those dealer incentive loans are an exception - but, as a rule, if you saunter into a dealer, get excited about a car and need to depend on the dealer to finance the car, you are about to get dinged. That is absolute fact.
Even if you wind up getting dealer financing, always have a piece of paper from a third-party lender that says you are per-approved for a loan. Aggressive dealers frequently will try to match or beat those terms, but at least you have established where the bar is.
“Pr-approval lets buyers focus on negotiations without the distraction of arranging a loan,"said Ronald Montoya with car site Edmund's.com. "A loan from an independent lender tells the buyer how much to finance and the actual interest rate. If the car dealer then offers a loan with a promotional APR, it will be obvious if it's a good rate or not.”
Next step? “Shop around,” said Perch. “Just like shopping around for a better deal on their new car, they should shop around for better rates on their car loan. Browsing websites of different banks and credit unions to see which one offers the most favorable terms doesn't take a lot of time and effort but can help consumers save a lot of money.”
Of course those dealer incentive loans are an exception - but, as a rule, if you saunter into a dealer, get excited about a car and need to depend on the dealer to finance the car, you are about to get dinged. That is absolute fact.
Even if you wind up getting dealer financing, always have a piece of paper from a third-party lender that says you are per-approved for a loan. Aggressive dealers frequently will try to match or beat those terms, but at least you have established where the bar is.
“Pr-approval lets buyers focus on negotiations without the distraction of arranging a loan,"said Ronald Montoya with car site Edmund's.com. "A loan from an independent lender tells the buyer how much to finance and the actual interest rate. If the car dealer then offers a loan with a promotional APR, it will be obvious if it's a good rate or not.”
Next step? “Shop around,” said Perch. “Just like shopping around for a better deal on their new car, they should shop around for better rates on their car loan. Browsing websites of different banks and credit unions to see which one offers the most favorable terms doesn't take a lot of time and effort but can help consumers save a lot of money.”
A $15,000 car loan for 48 months at 3% runs $332.01 monthly. At 5%, it is $345.44. At 2% it is $325.43. The differences add up.
Want to cut to the chase? Florida lawyer Anne-Marie Bowen said, “Go to your local credit union. They always have the best rates compared to banks and car dealers. That has been my experience for the last 20 years. Unless, of course, there is a 0% interest special deal when you buy the car.”
As a rule, credit unions come in 1% or more cheaper than banks, said multiple experts. But what makes credit unions especially appealing is that many are not ruled by FICO alone. At Generations Federal Credit Union in San Antonio, for instance, the institution has a 72% loan at 1.59%. Asked what the minimum FICO is to qualify, Generations communications specialist Lauren Mandel replied in an email: “One of the reasons to work with a credit union is that we don’t go off credit score alone - so there is no one credit score we look for. We take a variety of factors into account, including income, loan payback history, job history, etc.”
Credit unions, because they are non-profits, usually run lean and mean and that allows lower loan costs, said Jack Curtis, a vice president at Generations.
But don’t rule out big banks entirely. A search on Bank rate.com - which offers a handy tool - found that some of the best car loans are now originated by mega bank Chase which is offering 60 month paper at 2.67%. Credit union Pentagon Federal offered a better rate - 2.24% for 60 months - but Chase is in the mix.
Want to cut to the chase? Florida lawyer Anne-Marie Bowen said, “Go to your local credit union. They always have the best rates compared to banks and car dealers. That has been my experience for the last 20 years. Unless, of course, there is a 0% interest special deal when you buy the car.”
As a rule, credit unions come in 1% or more cheaper than banks, said multiple experts. But what makes credit unions especially appealing is that many are not ruled by FICO alone. At Generations Federal Credit Union in San Antonio, for instance, the institution has a 72% loan at 1.59%. Asked what the minimum FICO is to qualify, Generations communications specialist Lauren Mandel replied in an email: “One of the reasons to work with a credit union is that we don’t go off credit score alone - so there is no one credit score we look for. We take a variety of factors into account, including income, loan payback history, job history, etc.”
Credit unions, because they are non-profits, usually run lean and mean and that allows lower loan costs, said Jack Curtis, a vice president at Generations.
But don’t rule out big banks entirely. A search on Bank rate.com - which offers a handy tool - found that some of the best car loans are now originated by mega bank Chase which is offering 60 month paper at 2.67%. Credit union Pentagon Federal offered a better rate - 2.24% for 60 months - but Chase is in the mix.
shop around. It won’t take more than an hour or so but it may produce
hundreds of dollars in savings, just for doing a little Internet
searching.
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