Getting the cheapest car loan relies on a number of factors, not just your credit. While your credit score is still the number one determinant, obtaining a low cost auto loan also depends on the lender, the type of car you wish to purchase, and the length of your loan.

Cheapest Car Loans

Get Your Finances Straight

    The first thing you should do is figure out how much you can afford to spend. This will eliminate some options right off the bat and give you an idea of which cars you’ll be shopping for. You should save up a nice chunk of cash to be used towards a sizable down payment on your car loan. Paying a small downpayment may save you money at first, but it can lose you money in the years to come when your car depreciates in value. If you plan on trading in another car, this will also help you get a low cost auto loan.
    Next, make sure you check your credit score ahead of time. Knowing your credit score before dealing with lenders will give you an idea where you stand in terms of negotiation. The most affordable car loans go to those with the best credit scores. Typically, a FICO score of 760+ is the ideal target you want. If your score is below 760 (or even 700), here are some things you can do to raise it:

  • Check your credit report for errors. This is especially important as errors on your credit report will often go unnoticed unless you spot them. If you notice any errors on your credit report, you should dispute them immediately.
  • Hold off on applying for new credit cards. Each time you apply for a new form of credit, it shows up as an inquiry on your credit statement. Multiple inquiries will have a negative impact on your overall score.
  • Keep old accounts open. The average age of your credit accounts is a contributing factor to your credit score, and the older the account the better.
  • Get up to date on all payments and keep paying everything off on time. Missed payments will knock a few points off your score.
  • Try and keep your credit-to-debit ratio below 20%. A high credit-to-debit ratio will hurt your score, while a low one will raise it.


Affordable Car Loans

Seek Out All Lending Options

    To get the cheapest car loan, you’ll have to explore all lending options to see who can give you the best rate. The most common types of lenders are banks, credit bureaus, an online lender, or the car dealership. You may want to head to a bank first and get pre-approved for a loan and check out credit bureaus and online lenders before setting foot on the car dealership. The dealership will usually never give you the best deal, and some times there can be hidden fees which you may miss. Walking in with a pre-approval sets you up with more bargaining power if they offer you a loan. Remember that everything in the loan the dealer offers you is negotiable.

Look at New and Used Cars

    The most affordable car loans can go to either new or used cars, depending on the car. Usually, however, new cars offer a better interest rate than used cars because new cars qualify for zero percent financing. So if you’re stuck between a cheaper used car and a new car, check the interest rates for both and calculate which one will save you money.

    In order to get the cheapest car loan, your position will be strongest with a high credit score. Once you have that, you’ll be in a solid position to negotiate for the best loan. Make sure you do thorough research on different lenders. Getting around 3 quotes is ideal, but the more you get the better.