Recently, Car and Driver’s blog ran an excellent article called “How to Get the Best Rate on an Auto Loan.” (The post features comments from our own Chris Kukla, a colleague at the Center for Responsible Lending. Thanks, Chris!)
At Self-Help, we encourage you to talk to us before pursuing a loan with a car dealer. But if you do go with a dealer, a few key tips can help you get the best deal. Test your knowledge here:
TRUE OR FALSE?
When buying a car, it’s a good idea to tell the dealer the monthly payment you have in mind.
FALSE. Stay focused on the total price of the car, since the monthly payment will not include fees and other add-on costs.
Car dealers are not obligated to offer you the most affordable loan.
TRUE. Dealers often have several loan options from different lenders, but they have no legal obligation to choose the one that’s best for you. In fact, dealers are permitted to mark up the interest rates on loans and keep the extra cost as part of their compensation. You may or may not receive information on this mark-up. The best defense is to shop around for the best deal.
The interest rate on a car loan and the APR (annual percentage rate) are not necessarily the same.
TRUE. Make sure you know the APR of your loan, and not just the interest rate, since the APR includes fees and other costs related to the loan.
The law prohibits you from taking loan papers home before signing.
FALSE. You can take loan papers home before signing, and it’s a very good idea. When you take your time and carefully review all the information, you’re less likely to end up with surprise costs or, even worse, a car you can’t really afford.
Self-Help has helped many members buy their first car without taking on too much debt. Of course, we lend to veteran car owners, too. If you want to find out how much car you can afford, please call or visit your nearest branch office. More information on our car loans here.