Even as the sale of automobiles hit their highest in 2016, it is quite a paradox that it came at a hefty price. According to a report in 2014, the rate of auto repossessions increased by 70% and 60-day loan delinquencies shot up by 7% from the month of April that year. It means that this trend could well have spilled over in the coming years.
The loans given to subprime borrowers had increased since the recession of 2008. So, there were payment problems as people weren’t buying a car or motorbike for example, that they could realistically afford and is well within their budget if they have one in the first place.
Buying an auto loan isn’t as easy it as looks on the outset. It needs preparation and research. Here are some of the ways to get the best deals on auto loans.
Check your credit report and scores
There are credit reporting agencies such as Experian, Equifax, and TransUnion who can provide you with credit reports, which is the main documentation reference for many moneylenders and financial institutions. Different lenders may have different preferences of reporting agencies. Checking all three gives you the time to rectify any errors that might creep in as well.
Plus, the interest rate that you will be offered on the auto loan is heavily dependent on your credit score. The ones most lenders rely on are from trusted websites such as Credit.com and CreditSesame. But more than the lender, this is an important number for you to know so that you have a good idea where do you stand.
Compare different lenders
When you want your new vehicle, you will do what it takes to come to the best option. Why not compare various lenders while looking for an auto loan? Lenders set stringent loan eligibility criteria, so you need to know which loan matches up with another keeping in mind your credit scores and reports.
Usually, it is credit unions and community banks that offer the most suitable rates on auto loans. Also expecting low interest rates may not be in your best interests unless your credit score is extremely good. So, do not get tempted by advertisements as lenders want business opportunities.
Don’t get carried away by monthly payments
Many people believe that if they can afford monthly payments, they have a good deal that they can’t refuse on the vehicle. This is quite a misconception. A salesperson may ask you that to trick you to buy, but you don’t need to answer them that.
There are three negotiations generally involved in this – The price of the vehicle, the value of your trade-in and the type of financing. These are separate numbers.
Choose the shortest loan possible
Auto loans tend to get longer when vehicles become more expensive. The loan should ideally stretch upon two years on the maximum so that interest rates do not skyrocket. Even if the monthly payment is higher in this case, you will be able to pay off the loan faster.
