How to Secure a Car Loan in 2023

Of all the memorable and iconic moments throughout your life, few things beat getting your own set of wheels. Experiencing the sense of freedom and exploration that comes with car ownership is unparalleled. But buying a car is a major endeavor that requires a lot of research, test driving, and finding the right fit and feel for your driving style and habits. And in these economic times, one factor seems to compete above all else: securing a car loan to purchase the vehicle itself. Keep reading to learn how to secure a car loan in 2023.

Key Takeaways:

• Securing a car loan is just as important as shopping for your new car.
• Boosting your credit score can significantly increase your chances of securing a mortgage and lowering your car loan interest rate.
• Compare interest rates and terms from lenders, as well as dealership financing, offers.
• Making a larger down payment makes you an attractive borrower in the lender’s eyes.

Check Your Credit Report and Scores

It’s essential to know what information auto loan lenders receive about you and how it impacts your car loan application. Credit unions, banks, and online lenders use your credit report and scores to quote you for a loan. You can evaluate your credit report before applying for the car loan by getting a free copy from any of the three major credit bureaus; Experian, TransUnion, and Equifax.

The higher your credit score is (above 700), the more likely you’ll be approved for a car loan and on better terms. However, if your score is poor, it’s beneficial to take some time to improve your credit. Here are a few things you can do:

• Dispute errors and inaccurate information: Scour your credit report for any inaccuracies and errors and file a formal dispute. Keep in mind that errors can often lower your credit scores- so dispute them!
• Make payments on time: Payment history is a key aspect of your score and lenders usually want to know that you’ll make your car loan payments on time. Spend a few months paying every account you have on time to boost your score.
• Pay down debts: If you’re carrying high balances on your accounts, it’s in your best interest to pay them down. Having open credit accounts with low to zero balances can increase your chances of getting your car loan approved.

Research Your Financing Options

There are major options commonly used to secure financing for purchasing a car: direct lender financing and dealership financing.

Direct lender financing entails securing an auto loan directly from a credit union, bank, or financing company. It’s considered a good option for some buyers since it allows you the option to compare interest rates between lenders. It’ll also enable you to shop around without worrying about how you’ll afford the purchase as the interest rate and the loan will be locked in while you’re making your decision.

Dealership financing is offered through the dealership without the help of an outside financier. That’ll be a convenient option since you’ll be working with the same party throughout the process. Moreover, in many instances, dealership financing benefits from manufacturer subsidies that allow the dealers to offer lower interest rates than you can get from your credit union or bank.

Save for a Large Down Payment

A down payment is a portion of the car’s purchasing price that you pay in cash when buying it. Many buyers make a down payment, usually between 10 percent and 20 percent of the price, to cover part of the car’s price, then finance the rest with a car loan. Putting more money down enables you to take out a smaller loan, which results in lower interest. It may also help you pay off your vehicle sooner to lessen the impact of depreciation. Moreover, making a larger down payment makes you an attractive borrower in the lender’s eyes because you lower the lender’s risk (smaller loan). It’s also a sign that you’re a financially responsible borrower.

Pro Tip: Get Preapproved

Before setting foot on a car lot, you should research and compare the fees and terms of various car loans and get preapproved for the same. Getting preapproved for an auto loan before you go car hunting will help expedite the process should you find the right car for the right price and don’t want to delay the purchase. Besides, a preapproval offers you three more benefits:

• Leverage: When it’s time to buy a car, inform the dealer of your preapproval rating. If it’s the difference between getting your business and not, they may offer you a better rate.
• Budgetary Limits: A preapproval sets a clear budget for your car before you even visit the dealership. That way, you can limit your search and test drives to cars you can afford and skip the pricey ones.
• Security: While it’s not a guarantee, preapproval is an indication that you’ll likely qualify and secure the car loan you want. Besides, it locks in a rate so you aren’t subject to markups.

Want to Learn More? Give Us a Call!

The best car loan is something different for everyone. The options vary for each person based on your financial history, budget, preferences, and relationships with lenders. It’s crucial to understand the options available to you to avoid overpaying for the car loan. If you’d like to learn more about how to secure a car loan, and how you can benefit from dealership financing, consult our experts! With our skills and expertise, we’ll guide you through car financing to ensure your car buying experience is smooth and seamless. Call us now!

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