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    Auto Loan Rates: The Complete Guide

    Damien Frost
    Damien Frost - 2020-09-02T21:00:00.000Z
    Loan

    Buying a new or even a used car is a big decision. Not only is it a huge milestone, but it also means getting into a financial commitment. You’ll need to calculate the amount of money you need to borrow. Collecting as many quotes as you can from multiple lenders will give you the best idea of how much you need as a loan. 

    Compare the quotes and select the one with the lowest interest rates and EMI. Read on to learn about the auto loan process, how loan rates are set, and which banks have the best auto loan rates.

    How Do Lenders Set The Rates?

    Multiple factors determine your car loan interest rate. Interest rates and requirements may vary by lender and demographic.  

    • Your credit score: The better your credit score is, the lower the interest rate you get. The average interest rate for a 60-month loan on a new car can be different depending on someone’s FICO credit score. For example, subprime borrowers have a 14.06% average rate, while borrowers with good credit scores have an average rate of 4.95%
    • Selection of your vehicle: Your vehicle choice can affect the interest rate. New cars will have better rates. These are also the only cars that qualify for zero financings. Used cars generally come with higher interest rates and this is because they have been driven before and have a low resale value
    • Loan terms: The average car loan term is around 72 months. Longer terms don’t help save money on interest charges. If you select an extended repayment term, you’ll only end up paying more money as interest over the life of the loan. Longer loan terms also increase the chances of going upside down on the loan
    • Income and debt payments: Lenders consider other factors such as your debt-to-income ratio. They verify how much of your monthly income is used towards debt payments. The higher your DTI, the lower your chances of getting an auto loan
    • Credit history: Your credit history is a record of your ability to repay your debts, whether it's credit card payments, auto loans, student loans, or mortgages. By using that history, lenders estimate if you’ll be able to make payments on time. You're going to need a robust credit history to get approved

    Places Where You Can Get The Best Rates

    You’ll be able to find many auto lenders that offer lower interest rates. These include: 

    • Dealerships: Many auto loans are financed by the dealership. This means, instead of applying for a loan with lenders you can fill out an application with a dealership and the finance manager will search for the best for you. Dealer-arranged auto loans are convenient and save you a lot of time 
    • Banks: Many national and community banks offer auto loans with the best interest rates. You can even opt for a preapproved auto loan from a bank. Usually, banks offer competitive rates and terms
    • Credit unions: Credit unions are nonprofit organizations. Therefore, they have more competitive rates than banks. They use the money they earn to provide lower interest rates and give the best service to their members
    • Online lenders: Online lenders can offer lower interest rates than banks and even credit unions. This is because they don’t have any overhead costs. An online lender will help you with a preapproved loan before you apply for a loan formally. Moreover, shopping around and comparing auto loan rates will help you get the best deal  

    Ways To Get Good Rates

    Improving your credit score is the best way to get a lower interest rate auto loan. You can improve your credit score by paying off your debts and by making timely credit card payments. Along with improving your credit score, other things to consider are: 

    • Shop around: Search for multiple lenders and compare the rates offered by them. To get the best deal, apply for pre-approval with around five lenders. This will also help your chances of being qualified
    • Take the help of a cosigner: If you don’t have enough time to improve your credit score, apply with a cosigner. The lender will consider both credit profiles to determine the interest rate of your loan
    • Consider making larger down payments: Try giving a larger down payment to help lower the total sum you need to borrow. If you borrow a lower amount, the lender may offer you a better rate since there will be less risk involved
    • Go for a short repayment term: If you can afford a higher monthly payment, opt for a shorter repayment period. This will qualify you for a lower interest rate and also reduce your overall interest costs
    • Refinancing: Once your credit score or financing situation has improved, opt for refinancing your auto loan

    Bottom Line

    Buying a car is a life milestone. Therefore, make sure you get the best deal possible. Shop around to get the vehicle and financing option that’s most within your budget. Check your credit score and work on improving it before you apply for a loan. This will increase your chances of approval and will also help you in securing the best rates.

    Financing Your Next Mazda

    Once you’ve realized that you’re ready to drive your very own Mazda model, there are two possible ways of making that a reality. You can either opt to select from the various financing plans provided by the company itself or look for a lender, credit union, or bank that provides auto loan financing. 

    If you choose to go with Mazda Financial Services, the list of affordable plans include: 

    • Mazda Personal Contract Purchase (PCP) 
    • Mazda Conditional Sale 
    • Mazda Personal Contract Hire 
    • Cash Buyer 

    Each plan has different features that can easily be compared with financial plans provided by other lenders. After learning the terms and conditions of each plan, applicants will better understand what their options are. Those options include: 

    • Partly exchange the car 
    • Own the car by paying its guaranteed future value
    • Return the car 

    Selected Mazda Models

    The MX-5, Mazda3, and RX-8 are just a few of the brand’s more creative designs that prove it’s continuously producing some of the best looking automobiles of its time. Here are the innovative Mazda models that are taking the 2020 market by storm.

    Mazda 3 

    The Mazda 3, a lavish sedan and hatchback, comes with all the unconventional safety measures you’ll need while driving. The design is a part of the fourth generation that was introduced in 2019. Features include:

    • Advanced dual front airbags for additional safety 
    • Premium interiors with durable materials 
    • Sharp handling for exciting rides  
    • Outstanding audio and instrumentation features 

    The MSRP of the model depends on the engine, yet the car can still be purchased by paying an average amount, ranging from $21,000 to $26,500. 

    Mazda CX-3 

    Mazda CX-3 is the very first model from the CX-30 generation that was launched in 2020. It’s available in both extra small and small-sized SUVs. This car is known as the best compact car with all-wheel drive and the features including:

    • Swank, high-quality interiors 
    • Standardized safety features 
    • Refined ride quality with poised handling 

    The MSRP of this new model ranges from $21,900 to $29,600, depending on the size and engine that you select. 

    Mazda CX-5 

    With its incredible exterior, this iconic SUV ranks among the top compact SUVs on the market. Mazda CX-5 is created with an engaging performance that sets it apart from other competitive models introduced in 2017 and features include:

    • Enhanced noise reduction 
    • Standardized safety measures 
    • Acute steering and handling
    • Attractive interiors with a turbocharged engine 

    The stylish compressed model is available with an MSRP ranging from $25,190 to $37,155. 

    Mazda CX-9 

    This model is one of the most iconic and attractive sports cars on the market and was originally launched in 2016. The model comes with dual USB ports, unlike other signature and grand touring models. 

    • Premium interior with signature trim  
    • Energetic handling 
    • Quiet and comfortable for highways 
    • Spontaneous infotainment edges 

    This CX-9 second-generation model from Mazda is available with an MSRP ranging from  $33,890 - $46,215, depending on the engine you select. 

    Mazda MX-5 

    The Mazda MX-5 model is available in two varieties: the Mazda MX-Miata convertible and the Mazda MX-5 Miata RF Convertible introduced in 2016. Here are the main features of this car:

    • Sublime handling and steering 
    • Fixed roof coupe security 
    • Electronic folding roof 
    • Android Auto and Apple CarPlay trim levels 

    This groundbreaking model ranges with an MSRP ranging from $26,580 to $34,750, depending on the model you select. 

    Loan Options

    The first step towards financing your vehicle is to check out various auto loan options that are available to you in the market. Make sure to pay attention to each plan’s financing requirements and interest rates. 

    If you have a good credit rating, check out Consumer Credit Union as they offer the most competitive rates. If your credit score is on the lower side, you can try applying with Springboard. This lender is known to offer subprime auto loans to individuals with bad credit.

    If you want to refinance an existing loan at the best rates, make sure to check the rates offered by OpenRoad Lending. They partner with a wide number of banks and credit unions to offer a variety of car-related financing products.

    Bottom Line

    Mazda has excellent car models that can be a perfect fit for any budget. Have a look at the new and upcoming models to choose a car that best suits your lifestyle. Then, compare the available financing options and choose a good deal.