4 Steps to Getting the Best Deal on a Car Loan

Happy car owner
Photo by HBRH / Shutterstock.com

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
It’s Worth Paying Extra for These 14 Items
It’s Worth Paying Extra for These 14 Items

Here’s where to find the sweet spot at the intersection of price and quality.

5 Secrets of Seniors Who Keep Their Minds ‘Young’
5 Secrets of Seniors Who Keep Their Minds ‘Young’

Here is why some seniors’ brains work as well as those of people who are decades younger.

15 Great Amazon Finds You Can Buy for Less Than $5
15 Great Amazon Finds You Can Buy for Less Than $5

These products offer big value at a small price.

9 Hidden Ways to Get More Out of Amazon
9 Hidden Ways to Get More Out of Amazon

You don’t have to be a Prime member to take advantage of these little-known perks of shopping on Amazon.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

View this page without ads

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

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

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.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

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.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

27 Things You Should Never Pay For — and How to Get Them for Free
27 Things You Should Never Pay For — and How to Get Them for Free

When you know the tricks, you can save big on all kinds of useful things that others pay for.

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

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.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

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.