4 Steps to Getting the Best Deal on a Car Loan

Many people shop backward for their vehicle loans: First they find the car or truck they want, and then they ask the dealer for a good deal on an auto loan.

That is a mistake. Once you’re hooked emotionally, the dealer has little incentive to give you a good deal on financing. You’ve lost the opportunity to save perhaps thousands of dollars by comparison shopping on interest rates and terms.

Now that you know the downside, here are some things you can do to keep more money in your pocket — and out of the dealer’s hands.

1. Figure out what you can afford

Before you do any shopping, add up all expenses of owning a car. These include:

  • Insurance
  • Maintenance
  • Delivery charges
  • Registration fees
  • Tax
  • Lender charges like the origination fee, document fee and loan preparation fee
  • Any add-ons you buy from the dealer, such as an extended warranty, stolen vehicle recovery insurance or fabric and paint protection

Doing this exercise will help reveal how much car you can afford.

2. Shop for financing

Get preapproved for loans from several lenders. This step also should take place before you begin shopping for a car.

Include credit unions and banks in your shopping as well as auto dealers, so you can compare interest rates and fees available to you.

The Consumer Financial Protection Bureau website offers a set of tools titled “Take control of your auto loan” that helps you see the total cost of your purchase and lets you compare several loan offers.

3. Focus on the total cost

Fixating on the amount of your monthly payments can blind you to the actual cost of the loan, and how long it will take to pay it off. Shorter loans are cheaper — even though the payments probably will be higher — because you will pay fewer fees and less interest. Longer loans often carry a higher interest rate.

Getting into a long loan in which you owe more than the vehicle is worth puts you in a jam if:

  • You total the car in a wreck. Insurance covers only the vehicle’s market value, leaving you to come up with the cash to cover the remainder of the loan.
  • You need emergency money but can’t sell the vehicle.
  • You become bored and want a new car or truck.

4. Learn the value of your old vehicle

Don’t depend on a dealer’s estimate of what your trade-in is worth. Instead, use Kelley Blue Book to find the potential value.

Also read want ads, dealers’ used-car ads and Craigslist to learn what people are paying for similar vehicles in your area. This way, you’ll know if you would come out ahead by selling your old vehicle yourself and applying the money to the purchase.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Surprising Ways Retirees Waste Their Savings
7 Surprising Ways Retirees Waste Their Savings

You can make your retirement money last a lot longer by avoiding these costly mistakes

The 13 Worst Types of Tickets for Your Car Insurance Rate
The 13 Worst Types of Tickets for Your Car Insurance Rate

Some types of traffic violations can drive your car insurance rate dramatically higher.

Replace These 8 Things — for Your Health and Your Budget
Replace These 8 Things — for Your Health and Your Budget

Being frugal isn’t smart if you put off replacing these things. Waiting too long can cost money or even endanger your health.

3 Costly Social Security Mistakes That Women Make
3 Costly Social Security Mistakes That Women Make

Women face unique challenges when planning for retirement and making these mistakes can result in a skimpier retirement.

Never Put These 8 Things in a Microwave Oven
Never Put These 8 Things in a Microwave Oven

A microwave can be a busy cook’s best friend. But heating certain things in a microwave can cause disaster.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.