Determining the Car Loan Rate

There are a few factors that determine your car loan rate. Some of these factors come from your past history of spending; others are the dealer's or lenders. The dealership will lead you to believe that they have the lowest interest rates and can put you into a loan (and car) quicker then anybody else…even more than another dealer selling the same car. And while it is true, car manufacturers set-up certain incentives with their dealers, and they can offer good rates, these aren't the best rates in every single instance. It's best that you shop around, on the Internet or in person with your bank, to see what is available in financing and what loan rates you can get with your current credit.

Your financial picture is one of the biggest factors in determining the type of interest rate you can expect. No matter if you set up an auto loan through the dealership or with a bank, if you plan to lease or buy, if it is a new car or used; the type of car loan rate you can hope for is determined by what your credit rating is. This number is determined by adding your credit scores or FICA numbers from all three of the credit unions, then dividing by three. There is no way to fudge or even negotiate this part of the process and it is here that the dealer sees what plans they can offer you and at what rates. More then even the price of the car; your credit standing determines a dealer's options in offering you a good or bad interest. An average score around the 650– 675 will usually allow a 10% rate. Having an overall credit rating higher then this can see your interest rate drop to close to 5%; a lower score and you might be looking at 17%!

Price of the car is a factor though. Don't be fooled by the often asked: “Well, how much can you afford to pay a month?" You want to know the price of the car up front, and then you can work with your dealer's financial manager or go outside the dealership to see about a loan that works for you. Other then price of the car, the rate of interest on your car loan will also be determined by how long you take the loan out for. Only you know what you can afford a month, this really isn't the dealer's business until the very end of the negotiations. Factors such as, if you're leasing or buying the car, if it is a new car or used, and if you are putting down a down payment, also affect how much of a loan you need and therefore the rate of that loan. The car loan rate is contingent upon so many factors, both things you and the dealer bring to the negotiations.