Tips on Buying a Car With the APR Based on the Credit Score

Your credit score is an important player in the purchase of a new or used vehicle. Unless you have the cash on hand to buy the vehicle outright, you're going to finance at least a portion of the vehicle's price. There are several strategies you can employ to manipulate the interest rate attached to your auto loan to net you the largest savings and the lowest possible rate.

Clean Up Your Credit

If you don't have a lot of cash saved up to put a down payment on a vehicle, the best thing you can do to secure a low interest rate on a car loan is clean up your credit score. This strategy begins three to four months before purchasing a vehicle and involves you paying down your monthly revolving accounts, like credit cards, as much as possible. The more available credit you have in your credit accounts, the better your credit score is going to be because credit bureaus interpret this as responsible use of available credit.

Incentives and Rebates

If you have good enough credit to get the car loan you need but the interest rate is undesirable, try targeting a vehicle on the lot with dealer buying incentives like a rebate. You can often use this rebate to act as a down payment for the vehicle which lowers the overall amount you need to finance which can in turn lower your interest rate. This may require you to compromise on the vehicle you want to buy but it could also be the difference in you affording a car and having to walk to work.

The Down Payment

A cash down payment lowers the overall amount you need to finance to purchase a new or used car. This is particularly important if your loan interest rate is based solely off your credit score. If you have borderline good credit/bad credit a bank or other lending institution may be hesitant to loan you a large sum of money so the more cash you can apply directly to the cost of the vehicle the better. A serious cash commitment can also lower your loan's interest rate as the lender is able to see your serious commitment to the purchase.

Beware of Zero Percent Financing

You see advertisements all the time for automobiles with "zero percent financing." What you miss is the end of the commercial when the announcer says, "for qualified buyers." This means you could be lured down to the dealership with promises of thousands of dollars in savings only to lose out because your credit score doesn't qualify you for the sale. Always have all the information on this type of incentive before consenting to have your credit report checked by the dealership.