Factors that Affect Auto Loan Rates

For a number of car buyers, the type of car they purchase is dependent on the auto financing they can obtain.  Not only is this common but it is not an unreasonable conclusion.  With auto loan amounts averaging above $25,000.00 it is easy to see how the cost of financing can play an important role in the car purchase. 

Unfortunately, too many new car buyers fail to examine the factors that determine a car loan approval and the car loan rates.  In these situations, the car buyer is either not aware of the total costs of owning the car or they are at the mercy of the dealership to obtain competitive car loan rates and terms.

Knowing the factors that impact the car loan approval and the car loan rate is something every car buyer should be aware of unless they are making an all cash transaction.  If you are in the market for a new car, then knowing what factors affect your auto loan rate can help you figure out how to get the best car loan rate and the best car deal.

Generally, the biggest factor that determines auto loan rates is the borrower’s credit score.  Car loan lenders, and most all lending institutions, consider loan applicants with higher credit scores a lower risk and are offered the best loan rates.  Car loan lenders use credit scores as a quick measure to evaluate a borrower’s credit risk

The lower a borrower’s credit score, the more the buyer will need to pay to borrow money because car loan lenders will consider these applicants a higher risk.  For those borrowers that have less than perfect credit and therefore have a lower credit score, the car loan rates will be higher and the borrower may be denied a loan altogether. 

A car buyer who is not sure of their credit history, should obtain a credit report before they apply for a car loan to help avoid any surprises car loan rates and possible delays.  When borrowing large amounts of money for any transaction it is a good policy to obtain a copy of your credit report.  With the knowledge of what is in your credit history you can be better prepared to know what to expect when lenders view your score and credit report.  This puts you at an advantage when it comes to the auto finance rate you are being offered, and it helps you avoid unpleasant surprises.

The next most significant factor that influences the auto loan approval and the auto loan rate is the amount of the down payment being applied to the purchase. 

The down payment is important factor for all buyers looking to obtain an auto loan since many auto lenders have strict requirements on the amount needed to acquire the car loan.  Car loan applicants with credit score problems should pay closer attentions to this requirement.  Those individuals are not only wise to know that there auto loan rate may be higher but it may behoove them to make a larger down payment on the car purchase.  For borrowers that have lower credit scores, a larger down payment is considering a compensating factor and despite the credit history many car loan lenders may approve the car loan as well as offer a competitive interest rate.  

When looking at a car loan application, the car loan lenders will quickly evaluate other factors involving ability to repay the loan and responsibility. Things such as your monthly income, length of employment, occupation, whether you own or rent and how often you have moved, are factors that wil also be reviewed.

The first step to getting best auto loan rates is making sure your credit history is good and the credit score reflects this good credit profile.  You should also  know the car loan down payment requirements and what funds you have available for a down payment.  Remeber, the car loan down payment includes not only any cash amounts but the value of a trade in as well.  

Preparing ahead of time for auto financing is vital.  The best strategy is to take the time to research and get pre-approved for a car loan before visiting the car dealer.  To make sure you’re getting the lowest auto loan rate, be sure to check out what the auto lenders have to offer in advance.  The rate tables within this site, selectautorates.com, list the offers for low rates on new car loans, used car loans and auto refinancing.  It is always best to thoroughly comparison shop to secure the lowest auto loan rates available.

Tags: auto finance, auto financing, auto loan, auto loan rates, auto refinancing, Car loan, car loan approval, car loan lenders, car loan rates, new car loans, used car loans

This entry was posted on Thursday, September 3rd, 2009 at 8:42 am and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.