Best Used Car Loan Rates – Image via www.mybanktracker.com
Best Used Car Loan Rates – Wherever you get your loan or repayment term, the APR you grab is really important. So how can you save money and get a zero percent interest loan?
Why You Want Loans Without Interest
Most cars can be financed at reasonable interest rates. In fact, the average rate on car loans in the US is only 4.8% – far from the average credit card interest rate or even levied on personal loans. However, even if you only talk about two or three percent difference, it can still increase over time.
Best Used Car Loan Rates
For example, let’s say you buy a new vehicle and decide to pay $ 25,000 for 60 months. With an average interest rate of 4.8%, you will pay a total of $ 28,170 over the life of the loan – $ 3,170 in interest cost only. A 0% car loan, of course, will save you the full amount, which you can use to pay for your vehicle early, save for a new vehicle, or just pay for gas for several years.
If you are offered a rate of between 2-5% on your new or used vehicle, you may be tempted to accept it. After all, it sounds like a low rate compared to most other financial products! However, of course this is still increasing over time, especially with expensive purchases.
Who Can Get 0% Auto Loans?
Whether you’ve searched for a new vehicle or just seen an ad on television or radio, you might hear mention of a 0% APR offer. This fascinating promotion sounds too good to be true, but what is it?
Loans without interest are usually offered (and advertised) by the manufacturers themselves. This is a hook that is meant to bring potential buyers to the showroom and frankly, it often works. Sounds good, after all: You can drive with a new car (or new to you), pay it for a few years without paying a penny interest.
Unfortunately, very few people actually qualify for an auto loan without interest when it comes to the application process. A high credit score is required, excluding most car buyers from grabbing this enviable level. In fact, Tony Le from Edmunds.com, says, “Only one out of 10 consumers really qualifies for 0% and there are many factors that come into play.”
How high your credit score before you can think about qualifying for a 0% interest loan? Well, while there’s no difficult and fast threshold, Experian Automotive found that the average credit score for 1% -flower-or-less auto borrower in 2014 was 748.
Finally, the only people who can usually earn a 0% interest loan are those who are willing (and able) to take a lower loan term. If you buy a vehicle that requires a period of 48, 60, or even 72 months in order to pay your payment conveniently, you probably will not leave without interest. The interest-free offer is usually reserved for those who can take a loan period of 12, 24, or 36 months instead.
Increase Your Opportunities
If you die on a 0% interest rate loan, there are a few things you can do to increase your odds. None of them will guarantee that you will be able to buy your next vehicle entirely interest free, but they will help you improve your chances.
The first thing you can do is look for available offers. Explore manufacturers’ promotions right now, and even wait for the right advertised ads to start your car purchasing process. By carefully choosing your shopping time frame and working around 0% of the promotion, you will be on strike when the irons are hot and offers are available for pickup. (Sometimes, you will have the best luck towards the end of the year, when they complete a lot for next year’s model!)
You can also get a pre-qualification for a car loan before you ever set foot on the sales floor. This allows you to not only know what your bank or other lenders believe you qualify for (in terms of interest rates), but this will allow you to start negotiations with a slightly larger power. If you already have pre-approval for low interest rates, this may encourage the dealer to make a better offer … whether it is 0% or just slightly above.
Finding a 0% auto loan can be difficult, but it is far from impossible. Choosing the right time to start your next vehicle shopping, as well as having the right credit score to get a very good loan offer, can be the key.