5 Things You Might Not Know About Auto Loans
Besides a home, your vehicle might be one of the largest and most important purchases you’ll make – and just the idea of such a major investment can cause a little anxiety to set in. But armed with the right tools and knowledge, it doesn’t have to be a scary process. Doing your homework in advance can save you big and make car buying a smooth ride.
Before looking or applying for an auto loan, consider these 5 things:
1. You can refinance your car loan.
You’re likely aware that you can refinance a home mortgage loan, but the same can be done with your auto loan. Perhaps your credit has improved since you originally purchased your vehicle or a credit union is offering a lower interest rate – this is the perfect time to take advantage and lower your monthly rate by refinancing. Shopping around for a lower interest rate can save thousands over the lifetime of your loan.
2. Getting pre-approved for a loan before heading to the dealership will help you save.
If you’ve purchased a vehicle before, you’re probably like most drivers: you researched the car you like, shopped around for the best deal and made a trip to the dealership for a test drive. Then once you’ve made up your mind, you’re ready to sign on the dotted line. In this scenario, you’re leaving it up to the dealership to define your creditworthiness and match you with a lender. Instead, visit a credit union to get pre-approved before purchasing. This not only ensures that you get the lowest interest rate that you qualify for, but it also helps you understand what type of car you can truly afford.
3. Shop around for add-ons that are cheaper when purchased separately.
When buying a car, dealerships will try to sell you additional services or packages that might protect you and your vehicle while you own it. These services include insurance, warranties and extra safety features. Before rolling these into the contract, consider that many of these add-ons are actually cheaper when purchased separately. So do your homework. For example, you may not know that you can purchase Guaranteed Asset Protection
, or GAP Insurance, through your credit union, typically at a cheaper rate. So what is GAP Insurance? It covers the difference between what you owe on your loan and how much the car is valued at in the chance that you’re involved in an accident. If your vehicle is totaled or stolen, GAP pays the difference between the outstanding loan balance at the time of loss and the actual cash value of the vehicle (primary insurance settlement), less certain deductions.
4. Your financial institution can also help find the perfect vehicle for you.
A credit union or bank is more than just a lender – they can also be a resource for finding the right vehicle. Online shopping tools enable you to enter the car criteria you’re looking for and find matches near you. For example, our AutoSMART
tool allows you to easily browse local dealer inventory, research and compare vehicles, or build the perfect vehicle. With the click of a mouse it also gives you access to Kelly Blue Book® and NADA appraisal guides, member only pricing and help with selling your current vehicle.
5. Negotiate the total cost of the vehicle, not the monthly payment.
Most dealers will immediately start asking about what monthly payment you can afford. This trick allows them to adjust your interest rate and loan terms to determine a payment that fits within that budget. This could leave you paying thousands more over a longer period of time. Instead, know ahead of time what you can afford and focus on getting the best possible deal for the vehicle.
Most people agree that buying a car can be nerve racking. But doing your homework before heading to the car lot will help you feel more comfortable and more importantly leave with more green in your wallet for gas in the tank.
If you’re interested in financing or re-financing a vehicle, one of our member service specialists can help you navigate your auto loan. Contact us at 888.233.7228.