Getting a Loan from a Bank or Credit Union
When you're in the market for a car, one of the smartest moves you can make is to do the same kind of comparison shopping for financing as you would for the vehicle itself. Doing your homework to scout out the best financing deal can save you hundreds of dollars. Below, we explain the pluses and minuses of the most common options:
Getting a Loan from a Bank or Credit Union
Before setting foot in a dealer's show room, check out the average auto loan rates in your area and
know which banks offer the best rates. The gap between lowest and highest auto loan rates easily can
be two percentage points, so it's definitely worth shopping around. Though it may not seem like a lot,
one percentage point could mean saving
s of a couple hundred dollars over the life of a typical auto loan.
Auto dealers usually offer their own financing arrangements, which many consumers take advantage of simply for the convenience of one-stop shopping. If you decide to take this route, don't discuss any financing arrangements until you and the dealer agree in writing upon a purchase price for your car. "If you tell a salesperson what your goal is for a monthly car payment, it's easy to get bamboozled by all of the numbers they'll throw at you and lose sight of the hard realities: how much you're paying for the
car and what interest rate you're being charged," says Keith Gumbinger, vice president of HSH
Associates, a financial reporting firm in Butler, N.J. Case in point: one of Gumbinger's co-workers told a
car dealer she wanted to pay no more than $200 a month on her car loan, so the dealer gave her a
financing package that did just that, but at an interest rate she later discovered amounted to 22%
annually, versus the going rate at the time of 8.5%.
