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    Tips For Shopping For Auto Loans

    The best way to get your hands on a new car is to buy it in cash.

    Unfortunately, that’s not an option for many.

    Hence, the next best option is financing the vehicle.

    If you’re sure about financing a new car, shopping around for quotes and rates from multiple lenders will put you in a better position to negotiate.

    Just like many other loans, an auto loan is a monthly commitment.

    If you wish to save money, you should invest time to understand and compare the market rates.

    First Things First - Define Your Budget

    Before you start looking for a new car, you should define the budget.

    Ideally, a car that costs between 10% to 50% of your gross annual income is the right choice. Other than the purchase price of the vehicle, there are many other factors that you must consider while defining the budget.

    According to financial experts, a car loan should be paid off within 36 months or you might end up with an upside down auto loan.

    For instance, if you plan to take a loan, you must add interest, processing fees, down payments, and other charges as well.

    Depending on your credit score, you can get lower or higher rates ranging from 3.68% to 14.41% or more.

    Defining a budget will help you:

    • Prevent overspending
    • Get a better interest rate
    • Negotiate for additional rebates
    • Better manage your monthly installments

    Check With Banks And Credit Unions

    Once you have the budget defined, start by requesting quotes from multiple lenders.

    Do not just stick to dealerships as you’ll end up paying more in most cases.

    It’s a good idea is to seek quotes from credit unions and banks because:

    • If you already have an existing relationship, pre-approval might be easier.
    • Depending on your financial history, you can access lower rates.
    • You might qualify for additional loyalty discounts from these lenders.

    You shouldn’t limit your research to just a couple of lenders. Ask for as many quotes as you can.

    Next, compare all the rates and choose the best offer that fits your budget.

    Moreover, inquire about additional offers given most lenders will lower rates if you put in a higher down payment.

    Create A Small Shopping Window

    When you start asking for rates or apply for pre-approval, lenders will pull your credit history.

    This impacts your credit score by a few points. Lenders can run two types of credit inquiries:

    • A hard inquiry is done before approving your loan. It will lower your score temporarily.
    • A soft inquiry is done when you apply for a pre-approval. It doesn’t impact your credit score, but also doesn’t guarantee that you’ll receive the same rate.

    Too many hard inquiries within a short time might force the lenders to assume that you’re a high-risk debtor.

    The good news is that credit bureaus understand that customers go rate shopping before selecting a loan. Hence, they group similar inquiries into one single inquiry.

    For instance, FICO groups all similar queries within 45 days into a single inquiry.

    Consult with the lenders and create small shopping windows to lower the impact on your score.

    Funnel Communication

    Once you start comparing rates, you’ll get in touch with multiple lenders and banks. This means a lot of phone calls, emails, and attachments which can be overwhelming at times.

    The best way to manage all these incoming and outgoing emails and calls is to stay organized.

    A few things you can do to efficiently manage all of the quotes are as follows.

    • Start by building an EXCEL sheet. Add the lenders that you wish to receive quotes from. Make sure that you start with the lenders that you have an existing relationship with.
    • Every time you connect with a lender, make an entry in the sheet. Set the dates to better track the communication.
    • Most of the quotes will be sent via email. Organize your mailbox by creating specific folders per lender or one common folder for all lenders.

    Don’t Be Afraid to Negotiate

    Don't hesitate to negotiate the rates offered. It is difficult, but not impossible. First, we would recommend negotiating the best deal with the lender you’ve selected.

    Let them know that you have received better terms and rates from other lenders and ask them if they can lower the rate somewhat to win your business.

    A lender can often knock off a small sum from the total cost to keep you happy.

    If the first lender didn’t accept, try using the same technique with another lender. If you’re already pre-approved, you’ll be in a stronger position to negotiate the best rates.

    You can’t possibly negotiate every aspect, but here are a few areas where most lenders are okay to negotiate:

    • The loan’s APR
    • The interest rate
    • Processing fees
    • Origination fees
    • Extra charges like an insurance fee


    If you wish to save money on an auto loan, the best way to accomplish this feat is by doing a full-fledged comparison.

    You should check multiple quotes from different lenders, including banks and credit unions to ensure you’ve closed the best deal.

    You should also try getting pre-approved for added negotiating leverage and savings.