Obtaining the best car loan interest rates can be quite different lender to lender, so to understand this can be a maze in itself. We have put together a few tips to help you secure the best car loan interest rates.
Tip 1 - Credit Enquiries
Whilst shopping around for the best interest rates, make sure that any provider that has given an interest rate quote has done so without making an enquiry on your credit file. The more credit enquiries you have had in a short time, can impact on what interest rate you may be able to achieve, or even worse, can prevent you from obtaining a car loan approval.
Tip 2 – The Age Of The Car
The newer the car you are looking at buying, the better chance of obtaining a good car loan interest rate. As most car loans use the vehicle as security, a newer car may be a better security for them, and viewed as a better risk where they may reward this with a lower interest rate. This does not mean that you still can’t get very good interest rates on used cars; it will just mean that the options may not be so wide, so negotiating power is lower.
Tip 3 – Net Asset Position – Assets Minus Liabilities
Some lenders may give lower interest rates to those that have a stronger net asset position. Not all assets are classed the same though, where cash and property seem to be the most highly regarded assets. Not all automotive financiers operate this way, but the ones that do can offer very competitive interest rates to those that have are able to demonstrate that they have a good net asset position.
Tip 4 – Equity
If you are able to put a cash down payment, or you are trading in your existing vehicle, this could give you some equity into the finance proposal, which means that you are borrowing less than 100% of the vehicle value. This is a lower risk to the motor financiers and can result in a lower interest rate with some lenders.
Tip 5 – Use A Finance Broker
Not only will a finance broker do all the car loan shopping for you, they may get access to lower interest rates due to the competitiveness in the car loan market. It is of benefit to each of the lenders to target a finance broker’s business, as they are providing car loans each day, and if the lender is not competitive, the finance broker will go to the next lender that is.
A finance broker can also protect your credit file by not applying to any lenders that you wouldn’t qualify for. A good finance broker should be able to get it right first time for you.