How to Get a Low Interest Rate When Buying a Car

Get a low interest rate when buying a car and lower your monthly car payment. The interest paid on a car loan (or any type of loan) directly influences the monthly payment obligation. Auto lenders determine interest rate using different variables, and car buyers looking to keep their payments within a specific range typically use methods to get the best interest rate.

Instructions

1

Fix credit issues to qualify for a low interest rate when buying a car. Bad credit auto loans do exist, but people with poor credit pay higher interest rates. Monitor your credit beforehand and check your report for errors. Pay all bills on time and lower debt to help improve your FICO score. Apply for a car loan when your score is 700 or higher.

2

Budget for a down payment. An auto lender will approve you without a down payment, but having cash on hand can help you negotiate a cheaper interest rate on your auto loan, and ultimately save you money on the loan. Save at least 10 percent.

3

Pay off the car loan in less time. Skip 60-month or five-year financing and plan for a three or four-year auto loan term. Reduced terms typically result in lower interest rates. Compare monthly payments with a shorter and longer term, and choose the shorter term if you can afford the payment.

4

Negotiate a low interest rate when buying a car with a co-signer. When your credit score doesn't justify a low rate, use a co-signer to help bring down the auto loan rate. The co-signer will come with you to the bank or dealership and sign the loan papers. The auto loan appears on their credit report as well, and they agree to make the loan payment if you fall behind.

5

Request auto loan quotes. Check with your bank or credit union to see if they can offer a better rate on the auto loan. Dealerships offer car financing, but they may not offer the lowest interest rate on the auto loan, which can costs you more money in interest over the life of the loan.