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Auto Loan

11 Things to Know Before You Lease a Car

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Nearly one quarter of new cars in America are sold under lease agreement, and low monthly payments entice buyers who want to drive new cars, but don’t want to deal with a large cash outlay.

Lessees don’t build equity in their vehicle, but for the right person, a lease can be a good option. These are things you need to know before you consider a lease.

1. The best way to think about a lease

It’s best to think of a lease as a pay for use contract. A lease allows you to pay for the depreciation you put onto a vehicle at a reasonable interest rate. You get to drive and depreciate a vehicle for a certain period of time then you can walk away.

Due to higher markups, higher interest rates and additional fees, leasing tends to be an unfavorable financing mechanism, but if you don’t care about owning the car, a lease may be a good option for you.

As a lessee, you will drive the car during its most rapid depreciation phase, so in the long run, continuously leasing a vehicle is the most expensive way to drive, but if you always want to drive a new car, leasing can be a low hassle way to make that happen.

2. Leasing affects your credit score

Taking on a lease affects your credit the same way that taking on a car loan affects your credit. Applying for a lease triggers a credit inquiry on your report, which has a small adverse effect on your credit score. Taking on a lease increases credit utilization which also adversely affects your credit score. Over time your credit utilization will fall, and timely payment history will cause your score to increase again.

Leases are considered installment loans, and having a high utilization rate on installment loans does not have as much of an adverse effect on your credit score as having high utilization on credit cards or other forms of revolving credit. As with any form of credit, late or skipped lease payments drag down your score

Further Reading: Credit Score Guide

3. Leasing terminology

Manufacturers and salespeople shroud leasing in complex jargon. To understand the terms of your lease, these are the definitions you need to know.

  • Capitalized Cost: The price of the vehicle. This could be MSRP (Manufacturer’s Suggested Retail Price), or it could be reduced based on your negotiations.
  • Capital Cost Reduction: This is a down payment. The most favorable leases (for those who don’t intend to purchase at the end of the lease) should not include a capital cost reduction unless it’s an incentive.
  • Residual Value: This is the estimated value of the car at the end of the lease. The higher this price is relative to the capitalized cost, the more favorable it is to lease a car. Cars.com keeps a database of residual values on file that you can use to understand if you’re getting a fair residual value.
  • Factor, Money Factor or Rate: This is the interest rate of your loan, but it’s not expressed as an annual percentage rate. The number expressed needs to be multiplied by 2.4 to get to an APR. For example a 1.35 money factor is a 3.24% interest rate. LeaseHackr.com keeps an up to date list of “official” factors (column entitled MF) that you can use in negotiations. Interest rates on leases range from 2-3 times as high as interest rates on traditional car loans, but it is possible to negotiate this rate.

4. You can negotiate a lease

Unlike car loans, leases come from car manufacturers rather than banks. However, this doesn’t mean that it’s impossible to negotiate a lease. Anyone who intends to lease should try to drive down the capitalized cost, and people with good credit should also look to reduce or even eliminate the money factor. Small fees like documents fees, tire fees and more can be waived completely if you take the time to negotiate.

Even if a dealership advertises a “Manufacturer’s Leasing Special”, you should negotiate the terms of the lease. Salespeople depend on getting you to drive away in a new car, so consumers hold upper hand in negotiations.

5. No money down

One advantage of leasing a vehicle is that it shifts depreciation risk from the customer to the manufacturer. A down payment (or a capital cost reduction) shifts the risk back onto the customer. In a lease, a down payment is a form of pre-payment. If you terminate the lease before the end of the lease period (if your car is totaled or stolen), you lose the benefit that the down payment purchased. Putting no money down is an important strategy for keeping the lease in the lessee’s favor.

6. Extra insurance costs

Leasing yields lower monthly payments compared to buying using traditional financing, but some of the monthly cash flow advantage is lost by increased insurance costs. To protect themselves financially, lessees should purchase “Gap Insurance” in addition to traditional car insurance.

Gap insurance covers the difference between the actual cash value and the amount owed on a lease. As soon as a lessee drives the car off the lot, the car is worth less than the lessee owes on their lease. If a car is totaled or stolen during a lease period, you need to be able to buyout the lease early, and gap insurance allows you to do that. Gap insurance should be purchased through a traditional insurer, and adds anywhere from 3-10% to the traditional cost of insurance.

7. Fees, fees, fees

Every lessee runs into at least three substantial fees during the course of their lease. The first fee is an acquisition fee (alternatively called a financing fee). This fee is not a down payment, but it runs anywhere from $500 for basic compact cars to nearly $1,000 for luxury vehicles.

Dealerships also charge a $300-$900 Delivery Charge which covers the cost of the vehicle being delivered to the dealership lot. Lessees need to be prepared to pay this fee upfront, but some companies try to sneak a second delivery fee into the contracts. The second delivery fee can be negotiated to zero.

The last fee every lessee will encounter is either a disposition fee or a purchase option fee. These fees run between $300-$400 depending on which option you choose. When a lease ends, you will pay a fee to the dealership unless you negotiate it away at the outset.

In addition to these larger fees, many lessees will run into mileage overage fees which range from $.15 per mile for basic vehicles to $.30 for luxury vehicles. Most people drive more than their lease allows, and these extra miles cause additional depreciation on the vehicle. Since a lease is a “pay for what you use agreement”, it’s fair to pay for those extra miles. Of course you can avoid overage fees by limiting the amount you drive or by purchasing the car at the end of the lease.

You should negotiate smaller fees like advertising fees, tire fees, document fees, vehicle preparation fees down to zero.

8. Repairs required

Lessees bear the financial burden of repairs and maintenance on their leased vehicles. Some dealerships offer free tire rotation and oil changes, but the lessee has to pay for other maintenance. New cars shouldn’t require much maintenance, but accidents, chipped paint and broken windshields need to be paid for, and longer lessees may need to buy new tires while they own the vehicles

9. Exit options

Turning in a leased vehicle early is akin to defaulting on a car loan. Your credit will take a hit, and you will still owe money. However, it is possible to “sublet” your car through websites like SwapALease and LeaseTrader.

If your lease is about to end, you’ll have to decide whether or not to purchase the car or return it. If you want to buy the vehicle, you may be able to negotiate the buyout price. If you have the cash on hand to pay for the vehicle, and the purchase price is lower than an equivalent used car, you can purchase the vehicle outright and sell it for instant equity. If you have to obtain financing, the additional fees may erase any favorable pricing you obtained.

If the vehicle is worth less than the purchase price at the end of your lease, you should probably walk away from the vehicle or attempt some strong negotiations. Of course, the beauty of a lease is that the termination of the lease means that you can hand the keys back to the dealer and move on. 

10. Consider leasing if…

Anyone with midterm vehicle needs (only needing a vehicle for a few years) may find that a lease is a good value and a good fit for their lifestyle. Likewise, anyone who loves driving new cars and doesn’t mind having a monthly payment may enjoy leasing long term.

Continuously leasing vehicles is more expensive than “driving a vehicle into the ground,” but many people don’t mind that they get what they pay for.  People who enjoy driving newer, fancier cars may find that leasing can be a reasonable lifestyle, especially if they can easily afford the payment.

11. Avoid leasing if… 

Avoid leasing if you’re trying to drive as inexpensively as possible. The low monthly payments are enticing, but leasing is the most expensive way to drive in the long run. Leasing has high interest rates and high fees. If you can’t afford the monthly payments associated with owning a new car, consider buying used or choosing a basic model. Both of these methods end up being cheaper than leasing.

If you drive a lot, or if you frequently drive in poor conditions, you’re a bad candidate for leasing. The additional depreciation may mean that you’re left paying extra fees at the end of your lease. Additionally, anyone seeking to own a vehicle should pursue paying cash or taking out a traditional loan rather than leasing.

If you decide to purchase your vehicle instead of leasing it, it is best practice to get pre-approved for your auto loan before heading over to the dealership. [Disclosure: LendingTree is the parent company of MagnifyMoney.]We recommend starting with LendingTree. There are hundreds of lenders on this platform. After filling out your application, you will be able to see real interest rates and approval information at once.

Keep in mind, some lenders will do a hard pull on your credit and this is normal within the auto lending space. Multiple hard pulls only count as one pull, so it is smart to have all your hard pulls done at once, which LendingTree’s tool can do for you.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here

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Auto Loan, Reviews

The Best Auto Loans: 2018 New & Used Car Loan Rates

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

The best auto loan for you depends on your priorities, but two common goals are to get the most competitive rate and the lowest monthly payment. That’s why longer-term loans are so popular right now, with more people stretching out new and used car loans over 60 months or more. Despite that, new and used car payments hit an all-time high in 2017, meaning that people are spending more than ever on their vehicle purchases. That’s why MagnifyMoney has compiled a list of the best auto loans in 2018. We know that with rising rates, you need as much help as you can get finding the best rates to secure the vehicle you want and need.

Overview of the best auto loans in 2018

Lender name

Best for

Loan types offered

LendingTree

Comparison shopping auto loan rates

New, used, refinance, lease-buyout

LightStream

Car buyers with good or excellent credit

New, used, refinance, lease-buyout

Capital One

Car buyers with fair or poor credit

New, used, refinance

SpringboardAuto.com

Car buyers with fair or poor credit

New, used, refinance

Carvana

Buying a used car online

Used

How we picked the best auto loan rates

Using information from LendingTree, MagnifyMoney’s parent company, we compiled auto loan data over a six month period (August 2017 through January 2018) spanning across 22 auto lenders. We analyzed the loan data by applicant credit tier, and whether the loans were to purchase a used or new car to determine 1) the lenders consumers chose most often, and 2) the lowest average APR offered by the lender.

A closer look at the best new and used auto loans

Start with LendingTree

With LendingTree, you can fill out one short online form, and there are dozens of lenders ready to compete for your business. Upon completing the application, you can see real interest rates and approval information instantly. Some auto lenders will do a hard pull on your credit and this is common with auto lending. It’s important to remember, multiple hard pulls will only count as one pull, so the best strategy is to have all your hard pulls done at one time.

LendingTree
APR

As low as 2.19%

Terms

24 To 84

months

Fees

Varies

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on LendingTree’s secure website

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, personal loan offers within minutes. Everything is done online and you can have your loan pre-approved without impacting your credit score. LendingTree is not a lender, but their service connects you with up to five offers from personal loan lenders.

 

Where people with good credit (680+) get the lowest rates

LightStream

LightStream is the online consumer lending division of SunTrust Bank. LightStream seeks to make the online lending process easy, so you may apply, be approved, sign your loan agreement and receive your funds all through your computer or mobile device — no papers to fill out or sign.

Why we chose Lightstream
Out of the lenders compared, borrowers with good and excellent credit were most likely to choose a loan with LightStream and receive the lowest APR. You can read our full LightStream review here.

New auto loan product details

  • APR: See table below
  • Terms offered: 24 – 84months
  • Loan amounts: $5,000 - $100,000

Lightstream New Auto Loan APRs

Loan Amount

Loan Term (months) *

24 - 36

37 - 48

49 - 60

61 - 72

73 - 84

$5,000 to $9,999

3.99% - 6.49%

4.84% - 7.09%

5.04% - 7.29%

5.94% - 7.94%

N/A

$10,000 to $24,999

3.09% - 6.19%

3.44% - 6.44%

3.44% - 6.44%

4.29% - 7.29%

N/A

$25,000 to $49,999

3.59% - 6.19%

3.69% - 6.44%

3.69% - 6.44%

4.54% - 7.29%

5.14% - 7.89%

$50,000 to $100,000

3.59% - 6.19%

3.69% - 6.44%

3.69% - 6.44%

4.34% - 7.09%

5.04% - 7.79%

As of 6/02/18. Includes a 0.50 point discount for autopay. Exact rates depend on your credit profile.

Used auto loan product details

  • APR: See table below.
  • Terms offered: 24 – 84 months
  • Loan Amounts: $5,000 - $100,000

LightStream Used Auto Loan APRs

Loan Amount

Loan Term (months) *

24 - 36

37 - 48

49 - 60

61 - 72

73 - 84

$5,000 to $9,999

4.19% - 6.69%

5.04% - 7.29%

5.24% - 7.49%

5.94% - 7.94%

N/A

$10,000 to $24,999

3.09% - 5.69%

3.69% - 6.54%

3.69% - 6.54%

4.54% - 7.04%

N/A

$25,000 to $49,999

3.59% - 5.69%

3.69% - 6.54%

3.69% - 6.54%

4.54% - 7.04%

5.14% - 7.64%

$50,000 to $100,000

3.59% - 5.69%

3.69% - 6.19%

3.69% - 6.19%

4.34% - 6.84%

5.04% - 7.54%

As of 6/02/18. Includes a 0.50 point discount for autopay. Exact rates are dependent on your credit profile and for purchases made from dealer. 

What we like

  • Fixed rate, simple interest fully amortizing installment loans. This means you won’t pay interest on your interest, and if you follow the payment schedule, your loan will be fully paid off at the end of the term.
  • No fees or prepayment penalties
  • No restrictions on the vehicles year, make, model or mileage
  • If you’re not 100% satisfied, Lightstream will pay you $100 (conditions apply)

Where it may fall short

  • Loans may not be used for a cash-out refinance
  • Secured loans may not be used for commercial vehicles
  • Vehicle must be classified as automobile, sport-utility vehicle (SUV), light-duty truck, passenger or conversion van
  • No phone support for customer service. Everything is handled by email

How to apply
Before you apply, keep in mind that you’ll need to:

  • Have good credit
  • Have sufficient income and assets
  • Agree to electronic records and signatures

Applying is done entirely online. You’ll provide:

  • Personal information. Name, address, phone, Social Security number, driver’s license, etc.
  • Employment information. Employer name and address, income and other financial assets
  • Loan information. Loan purpose, loan amount and term
  • Security information. Create a username and password
LightStream

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Where people with fair (620-679) & bad credit (500-619) get the lowest rates

Capital One Auto Finance

Capital One is a Fortune 500 company and a trusted name in banking and other financial services. In the fourth quarter of 2017, Capital One originated $6.215 billion worth of auto loans, making it one of the top five U.S. banks offering auto loans.

Why we chose Capital One
The most borrowers with fair and bad credit chose a loan with Capital One, and it came in second in terms of lowest average APR.

New auto loan product details

  • APR: See table below
  • Terms offered: 36 – 72 months
  • Loan Amounts: $4,000 - $40,000

Capital One new auto loan APRs

Credit

Loan Term (months) *

36

48

60

72

Rebuilding

8.20%

8.20%

8.20%

8.20%

Average

4.46%

4.52%

4.52%

5.07%

Excellent

3.24%

3.24%

3.24%

3.24%

As of 6/02/18

Used auto loan product details

  • APR: See table below
  • Terms offered: 36 – 72 months
  • Loan Amounts: $4,000 - $40,000

Capital One used auto loan APRs

Credit

Loan Term (months) *

36

48

60

72

Rebuilding

8.20%

11.20%

11.20%

11.20%

Average

5.19%

6.69%

6.69%

6.94%

Excellent

4.14%

4.34%

4.34%

4.64%

As of 6/02/18

What we like

  • Easy to pre-qualify online without a hard inquiry on your credit
  • Minimum monthly income required is $1,500 or $1,800, depending on your credit
  • 12,000 auto dealers work with Capital One

Where it may fall short

  • The best rates require excellent credit with 20% down on the vehicle
  • Vehicles must be 2006 or newer
  • Vehicles must have less than 120,000 miles
  • Dealers may charge additional fees, including document fees, dealer preparation fees and delivery charges
  • Maximum loan amount may not cover the cost of the vehicle you desire

How to apply
Apply using Capital One’s Auto Navigator. Enter your personal information including your Social Security number to get pre-qualified for an auto loan without affecting your credit. Then take your financing certificate to the dealership to shop for cars and make a selection. Once you’ve selected a vehicle, the dealer will have you fill out a credit application and you’ll finalize the paperwork for your vehicle purchase with the dealer.

Capital One

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SpringboardAuto.com

SpringboardAuto was started in order to streamline the auto finance experience online. The company says its online application takes less than a minute to complete. You may upload documents via your computer or mobile device, and online tools allow you to check the status of your loan and move through the auto finance process at your own pace.

Why we chose them
Fewer people chose Springboard compared with other lenders, but when they did, they were offered the lowest average APR.
New auto loan product details

  • APR: Starting at 7.00%
  • Terms offered: Up to 72 months
  • Loan Amounts: $7,500 - $45,000

Used auto loan product details

  • APR: Starting at 7.00%
  • Terms offered: Up to 72 months
  • Loan Amounts: $7,500 - $45,000

What we like

  • Get a personalized rate after filling out an online application that doesn’t affect your credit
  • Fast and easy online application
  • Quick loan decision
  • No prepayment penalties

Where it may fall short

  • Depending on your state, you may pay an origination fee ($395 for a private party purchase, $395 for a dealer purchase and $295 for a refinance).
  • Auto loans are only available in 26 states.
  • Vehicle must be 2008 or newer.
  • Vehicle must have no more than 138,000 miles.
  • Must be one of the eligible makes (see below).
  • No loans for commercial vehicles.
  • No loans for leased vehicles.

Eligible makes

  • Acura
  • Audi
  • BMW
  • Buick
  • Cadillac
  • Chevrolet
  • Chrysler
  • Dodge
  • FIAT
  • Ford
  • Genesis
  • GMC
  • Honda
  • Hyundai
  • INFINITI
  • Jaguar
  • Jeep
  • Kia
  • Land Rover
  • Lexus
  • Lincoln
  • Mazda
  • Mercedes-Benz
  • MINI
  • Mitsubishi
  • Nissan
  • Ram
  • Scion
  • Subaru
  • Toyota
  • Volkswagen
  • Volvo

Online experience
SpringboardAuto makes the loan process simple and easy online. After filling out your online application, you may upload the required documentation using a computer or smartphone. At closing, you’ll sign your loan documents electronically.

How to apply
Fill out the single-page online application, and it determines your eligibility without affecting your credit. You’ll need to provide your personal information, like your name, address, Social Security number and income, along with the vehicle information if you’ve selected a vehicle (VIN, mileage, year, make, model, trim).

SpringboardAuto

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Where to buy (and finance) a used car online

Carvana

Carvana specializes in helping you shop for a car online. It uses things such as 360-degree photos, free vehicle history reports, details and specs, ratings and reviews to provide you with the maximum amount of information.

Why we chose them
We looked at the three used auto lenders chosen most often in each credit tier, and Carvana was the only lender in the top three in every tier. That’s why we chose Carvana, even though other lenders offered lower average APRs on used auto loans.

Product details – Used auto loans only

  • APR: APR depends on credit history, vehicle type and down payment.
  • Terms offered: Up to 72 months.
  • Minimum loan amount: None
  • Maximum loan amount: Any amount, as long as it’s a vehicle listed on the Carvana website.

What we like

  • High level of detail on vehicles makes online shopping easy
  • Online application personalizes your shopping experience and doesn’t require a hard pull on your credit
  • You can return the vehicle within seven days and get your money back (Make sure you’re familiar with the limits on this policy before you buy)
  • All vehicles are certified with a 150-point inspection

Where it may fall short

  • Only available for used vehicles
  • Carvana is a car dealership, and you must select a vehicle through their website

Online experience
Carvana provides a lot of information about each vehicle. You won’t have to visit other sites to find specs or read reviews

When you fill out the online application, you’ll see a breakdown of your monthly payment, minimum required down payment and your APR, making your shopping experience truly personalized.
How to apply
You may get pre-qualified with Carvana without a hard pull on your credit by filling out the online application. After you complete it, you may start shopping for a used vehicle, and your payment, down payment and APR will be displayed for each vehicle. Keep in mind, with Carvana, you must purchase a vehicle in their inventory.

Carvana

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on Carvana’s secure website

Understanding the auto loans process

How do auto loans work?

For the lenders we detailed above, you may apply for a loan online and receive personalized loan rates without a hard pull to your credit. So while you don’t see rate tables on certain lender websites, don’t be discouraged. If you’re serious, just fill out an application to see what you may qualify for.

Once you’ve completed the initial application, you’ll be able to shop for a vehicle knowing which type of financing you’ll likely qualify for.

Once you’ve selected a vehicle, you’ll need to submit a full application for the loan. This can be done online or with a dealer, if you’re working with one. Once again, most lenders are streamlining this process online, so for the lenders we discussed on this page, you may upload your documents using a computer or mobile device.

Once you’ve purchased the vehicle and completed your loan documents, you’ll just need to make payments. Making payments has moved online as well, and many lenders offer apps to help you manage your payments and loan information using your mobile device.

Tips when shopping for car loans

Here are some tips to help you avoid common mistakes and shop confidently for a car loan.

  • Set a budget. Everyone says it, but it’s not always easy to do. If you aren’t keeping a budget, here’s how to start in four easy steps.
  • Know how much you can afford. MagnifyMoney suggests you keep your total car expense less than 10% of your monthly budget. This is part of the 20/4/10 rule, which also says you should put down at least 20% and choose a maximum loan term of four years.
  • Save for a down payment. The amount of your down payment is likely to affect the interest rate you receive when financing your vehicle. So saving for a larger payment will help save you money and putting more down will lower your monthly payment, too.
  • Check your credit. You’re entitled to a free copy of your credit report from each of the three major credit bureaus every 12 months, and it’s easy to get your free credit score from a variety of sources.
  • Consider a co-signer. If your credit score is low or you have a limited credit history that needs improvement, having a co-signer with good credit on your auto loan could significantly lower your interest rate.
  • Shop around. It’s smart to get multiple rate quotes, so you may compare loans.
  • Get pre-approved. Shopping for a vehicle doesn’t make a lot of sense if you don’t know how much money you’ll have to work with. Shoppers have many options for getting auto loan quotes without a hard inquiry on their credit, but if you’re serious about buying a car, doing all your loan shopping in a short period of time will minimize the potential impact on your credit score, if loan applications result in a hard pull.
  • Talk to local credit unions. While banks and online auto loan companies offer easy-to-use online tools, don’t forget to talk to your local credit union to see if it has a more competitive rate.
  • Beware of extra fees. Keep in mind you’ll need to pay state taxes and title fees. In addition, dealers may charge fees, including document fees, dealer preparation fees and delivery charges. These fees will affect your APR if you finance them into your loan.
  • Check your paperwork. Everyone makes mistakes. When you get the final copy of your auto loan, check to make sure you got everything you were promised and there are no extra fees.

How to apply for an auto loan

From choosing the right car to getting approved for financing, this article will walk you through the complete online car buying process.

When you apply for an auto loan, it will help to have your documentation ready. This will include proof of identity, proof of income, credit and banking history and proof of residence. If you’ve selected a vehicle, you also want that information, including VIN, mileage, year, make and model.

While many online lenders advertise the loan process as being quick, be prepared for roadblocks. Sometimes a lender may request additional information or take time to verify information, and that may delay the process.

Be proactive! Once you’ve started the auto loan process, the lender will walk you through what’s needed. But that doesn’t mean you have to wait for your lender to get back to you. If the loan process has stalled, make a call or send an email to your lender asking what’s needed. In many cases, you’ll have an online login that will allow you to see your loan status, or take the next step online.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Ralph Miller
Ralph Miller |

Ralph Miller is a writer at MagnifyMoney. You can email Ralph here

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Auto Loan

The Best Places to Look for Auto Refinance Companies

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

When you’re looking to refinance your auto loan, it’s best to check around at multiple lenders for the best rates. Because many lenders today offer online loan options, you can check out the most current offers without putting in the actual legwork of shuffling from bank to bank in person.

See what rates your bank or credit union advertises. Check their websites or call them by phone. Often they’ll give rate discounts when you make automatic payments using one of their checking accounts, which is an easy bar to meet if you’re already a member.

Look at competing lender offers. Whatever your current bank or lender says, compare them to other deals by shopping online. There are dozens of auto loan options out there, but don’t be intimidated. We’ll help you find the best places in this guide. It won’t hurt your credit if you apply to a few different lenders for the same type of loan within 14 days, so don’t let that stop you from applying to one of the best car refinance companies if something looks good.

Look at what your current lender advertises. Not all companies refinance their own loans, but, for those that do, you might be able to refinance with the same company if you qualify for a lower rate or different term.

In this guide, we’ll show you the best places to start shopping for an auto loan refinance, as well as provide tips on how to decide when refinancing is the best move for you.

The best places to shop for an auto loan refinance

To help you choose the right ender for your refinance, we picked out some of the best places to refinance a car online. We started by analyzing more than 450,000 auto refinance applications for 17 lenders submitted through the LendingTree marketplace over a six-month period (September 2017 to February 2018). We then compared and selected the top four lenders that 1. consumers were choosing most often and 2. offered the lowest average APR.

LendingTree

If you are looking to explore your options, LendingTree is a good starting place. Its online auto lender marketplace lets you compare up to five lenders side by side. You can find lenders that offer loans with APRs starting at 2.09%. Motorcycle and RV financing and refinancing are available as well. People of all credit scores may apply. After completing a short online form, you may be able to see real interest rates and find out if you prequalify for any offers instantly.

Pros:

  • LendingTree partners with dozens of financial institutions that compete for your business. Depending on your circumstances, you may be matched with one or more lenders at one time, allowing you to potentially compare several offers and choose the lender that has the best rate and loan terms for you.

Cons:

  • Some of the lenders on LendingTree don’t offer prequalifications. You may or may not be matched to one that does a preapproval, not a prequalification, which would require a credit pull.

A prequalification is a not an automatic approval. Some auto lenders may not offer a prequalification at all and they may require you to submit an application for approval.

How to apply
Go to the LendingTree website and fill out the prequalification form. You’ll need the vehicle information, your information, including contact, loan, employment and income details on hand.

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Disclosure: LendingTree is the parent company of MagnifyMoney.

iLendingDIRECT

Like LendingTree, iLendingDIRECT is an online marketplace where you can potentially be directed to multiple auto lenders. Once you submit an application, the company will shop around for the best loan offers for you. It works with more than 20 financial institutions to offer a wide range of refinancing options, cash back loans, lease buyouts, and more. APRs start at 1.99%. Cars, trucks, motorcycles, boats and RVs can be refinanced; maximum terms and amounts depend on the type of vehicle.

Pros:

  • In some cases, you can skip the first month’s payment to give your wallet a break. If you don’t qualify for refinancing because of poor credit, iLendingDirect will work with you to help you improve your credit so you can qualify.

Cons:

  • Compared to other refinance marketplaces, iLendingDirect has relatively few financial institutions as partners.

To apply
Either call them or fill out a short contact form online and they’ll reply to you. You should have your personal contact information, your vehicle’s year, make and model, and your loan information at hand. With this information, they’ll find the best offers you’re pre qualified for, and you can choose from those which loan you’d like to apply for.

rateGenius

rateGenius is another online loan marketplace, but this one specifically works with borrowers seeking to refinance. They have a network of 150 lenders around the country. APRs start at 1.99% and loan amounts and maximum and minimum loan terms will vary depending on the type of vehicle.

The original loan term may be shortened or lengthened, though usually rateGenius will match the term of your new refinanced loan to the amount of time left on your original loan.

Pros:

  • The application takes a few minutes and refinance offers are ready within 48 hours. rateGenius itself doesn’t charge any fees to you for using their marketplace.

Cons:

  • rateGenius doesn’t refinance specialty vehicles. This plan also might not be the best fit for you if your income ebbs and flows from month to month.

To apply
Give them a call or fill out an online application form. You should have the following information ready.

  • Current loan information (lien holder name, monthly payment)
  • Vehicle information (make, model and style; VIN; mileage)
  • Employment information (along with a phone number for employment verification)
  • Personal information (SSN, name and contact details)

Autopay

The online loan marketplace AutoPay works to provide refinancing to people at different levels of credit. The minimum loan term is 24 months, while the maximum goes up to 84 months. You have to have at least $5,000 remaining on your loan and no more than $100,000. APRs start at 1.99%.

Pros:

  • This would be one of the best refinancing companies to go with if you have a small amount remaining on your loan or less-than-great credit.

Cons:

  • Depending on its lending partners at the time, Autopay doesn’t refinance specialty vehicles other than motorcycles.

To apply
Visit its website to fill out an online prequalification form. You’ll need your driver’s license, a payoff letter from your current lender, proof of insurance on the vehicle, proof of income and proof of residence. Autopay then works to find the best refinancing offers for which you’re pre-approved, and you can choose which to apply to.

Benefits of refinancing your auto loan

There are different ways to ditch a bad auto loan, or simply improve your payments to suit your current cash flow, and refinancing is a great way to do it.

Nicolas Ortiz, an auto insurance agent and adjuster at USAA headquarters in San Antonio, Texas, has worked in the industry since 2011 and did a stint as a finance manager at a car dealership for over a year.

“Most people look to refinance in order to lower their payment,” he said, “and you can get other benefits that come with it.”

Here’s more about the benefits of refinancing:

Get a better interest rate. If your credit has improved from when you first signed for the loan, you may qualify for a lower APR. “If you apply to refinance and get a lower APR, not only will your monthly payments be lower, but the overall interest that you pay will be lower, too, if you keep the same term.” Ortiz explained.

Decrease your monthly payment. If you’re strapped for cash, a lower car payment can make a big difference. It could give you some breathing room or prevent a repossession. To get a lower monthly payment, you may refinance with a lower APR, refinance for a longer term or both. Keep in mind your total interest cost may be higher over time when lengthening the term of the loan even if the APR is low.

Decrease your loan term to reduce interest payments. The less time you spend paying back a loan, the less you are likely to pay in interest payments. “To lenders, a greater length of time means a greater amount of risk; greater risk means more interest.” Ortiz told MagnifyMoney. Decreasing your loan term when you refinance will likely decrease your APR, but increase your monthly payment.

If you don’t want to commit to a bigger monthly payment when you refinance, one way to get a similar result is to simply refinance to get a better APR, then make monthly payments that are larger than the required monthly payment. This way you’re going to pay the loan off faster and pay less interest, but you have the option to make the lower required monthly payment if funds are tight.

Double-dip. If you have excellent credit and finance through a manufacturer when buying a new car, you usually have a choice of either getting a low APR, or getting large rebates from the manufacturer. “What you can do is if you qualify for manufacturer financing, take the rebates, sign up with them, and then turn around in a month and refinance with a credit union or bank that will give you a lower APR.” Ortiz said. You get the rebates from signing up with the manufacturer and the low rate from refinancing.

What to watch out for

A refinancing company may offer you add ons like GAP insurance or a warranty, which is also called a vehicle service contract (VSC). Make sure you know exactly how much each costs you and what it does. Don’t just say yes to a monthly payment that includes it.

GAP insurance stands for Guaranteed Asset Protection and covers the debt on the car that your auto insurance company doesn’t. For example, if you get a new car, don’t give a down payment, and crash the car a month later, what you owe on the car will be more than what the car is worth. GAP insurance covers the “gap” between what you owe and what the insurance company pays.

An extended warranty, also called a vehicle service contract (VSC), is an insurance product that will cover certain repairs to the vehicle. It is not your regular car insurance and won’t cover car repairs if you’re in a crash. It will generally cover repairs if something breaks from wear and tear.

For example, if your AC goes out because you live in a hot climate and like to make your car an ice box in the summer, the VSC might cover it. It depends on what type you get. It can be complicated, so, if you’d like one, know that you can negotiate on it and make sure you know what you get for the price you pay.

Questions to ask before you refinance an auto loan

While you can refinance at anytime, some people try to refinance when it may not make much of a difference, or may make a difference in a worse way.

Here are some questions to help you figure out if refinancing your auto loan is right for your situation.

Has your credit changed significantly?
If your credit’s gone up enough to push you into a higher score band (from “fair” to “good” for example), you should definitely check out the best auto refinancing companies to see if you can get a deal. You can use LendingTree’s free credit score tool to check your credit status. Note: LendingTree is the parent company of MagnifyMoney.

If you have a high APR auto loan because of poor credit, has your credit improved?
Many people who have poor credit and little choice but to sign for a high APR auto loan might ask when their credit will improve to the point they’ll be able to refinance at a lower APR — but it really depends on your specific situation. There are steps to successfully improve your credit. Making monthly payments on-time and in-full should help improve your score. Just have patience — lenders typically report payment behavior to the credit bureaus once every 30 days, but that can vary by lender.

If your credit hasn’t increased, or it’s dropped into a lower category, refinancing at this time probably isn’t right for you.

Do you want to add or remove a co-signer?
By refinancing with a new lender, you may have the ability to remove a cosigner from the original loan. However, you may struggle to get approved for refinancing if your credit is poor, you are underwater on your loan (meaning you owe more than the car is worth) or if you have missed several payments.

If you are looking to add a cosigner to a loan in order to get approved for better loan terms, make sure they understand the pros and cons. Their credit history can be positively affected by you making payments, but they will also be accepting liability for the loan if you fail to make payments.

Are you underwater or upside down?
Do you owe more on the car than it’s worth? If you do, you might want to think about paying down the loan before refinancing. You’ll be able to get the best deal in refinancing if your loan is equal to or less than the value of the car. However, if you know you can get a better rate now, even if you’re underwater, it might be worth doing so. That way, more of what you do pay on the loan goes to the principal and you can pay down the loan faster. Then, once you’re no longer underwater, you can refinance again for an even better rate. You’re not limited on the amount of times you can refinance.

Are you in danger of a repossession?
If you lost your job, had a family emergency, or just have a lot of trouble making payments, refinancing can make the best of a bad situation. You may not be able to finance into a loan that has a lower APR, but you may get a loan with a longer loan term, which will lower your monthly payments and give you more room to catch up.

Have auto loan rates dropped recently?
National trends in loan interest rates change based on national policy, politics and demand. Rates are expected to continue to increase this year, and indeed, rates hit a five-year high in February 2018. This isn’t a good trend for the auto loan consumer, as auto loan rates increase with it. If there is a sudden jump in the national rate for the season, consider refinancing a little later. If there is a sudden dip, like there was in the fall of 2017, it’s a good time to shop around.

When to consider refinancing

When to avoid refinancing

If the car is worth more than you owe on the loan.
Positive equity in a vehicle is attractive to lenders and will put you in the best situation to get a great rate.

If your credit improved significantly from the time you signed the auto loan.
By paying your obligations in full and on time, your credit might have gone up since you first got your auto loan.

If you’re in danger of a repossession.
Skipping and missing payments can have a negative effect on your credit. Refinancing could help you get a lower monthly payment you can afford and help you avoid trashing your credit score.

If you want to change something with a cosigner.
You could add on or take off a cosigner to the benefit of your interest rate.

If your credit has worsened significantly from the time you signed the auto loan.
Lenders base the interest rate heavily on your credit history and your credit score. Getting an auto loan with bad credit is not necessarily impossible, just more expensive.

If you owe a lot more on the loan than the car is worth.
If the car is worth a lot less than what you’ve promised to pay, the loan is riskier, thus making it harder and more expensive for you to get a loan — but there are ways to handle this type of situation.

If national interest rates rise by a point or more.
Interest rates on auto loans change along with the flux of interest on the U.S. 10 Year Treasury Note, because the loan terms are similar. If it shoots up, the lowest APR you can get will go up as well. Depending on your situation, it might be better to wait to shop for the best refinancing deal — or, if you want to refinance as soon as possible, go ahead and refinance and then keep on eye on national rates to maybe refinance again if there’s a big change.

If the car is brand new or really old.
Cars depreciate the most in the first two years. If you didn’t give a down payment, odds are that you’re underwater on your auto loan during that time period. Really old cars also aren’t really valuable to lenders and most have limits on vehicle age and mileage.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at jennifer@magnifymoney.com

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Auto Loan

7 Reasons to Get a Preapproved Car Loan Before You Go to the Dealership

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

iStock
When you need a new car, most people start looking at car options online and then head to the dealership, thinking only of the vehicle itself. Then the salesperson shows up, and you go through the process of looking and test-driving and negotiating the price. When you finally get to the paperwork, you’re exhausted, right when you’re about to discuss the most important part of this whole transaction — the financing.

Wouldn’t it be nice if you had most of the auto loan part done before you even walked into the dealership? Not only is getting preapproved for auto financing the best way to ensure you’re getting the greatest possible deal on your loan, it’s also a simple way to expedite the entire car-buying process itself, helping you get in and out of the dealership and into your new ride faster.

Here, we’ll give you an overview of how to get preapproved for a car loan as well as all the benefits that come with it.

How does a preapproved car loan work?

When a lender gives a preapproval for an auto loan, it means the lender agrees to finance a car for you up to a certain amount, at a certain APR for a specific time.

Be aware that a pre-qualification and a preapproval are not the same thing. A pre-qualification is a soft offer in which most lenders do not pull your credit. If you have a pre-qualification and then do an official application, once you know the car you want, your actual loan offer might be very different, because lenders will do a hard pull on your credit and get a fuller picture of your credit history.

A preapproval, on the other hand, is a firm offer by a lender. Once you decide which car you want, the final loan offer should generally stay the same.

To apply for a preapproval, you can either go online directly to the lender’s website or go in person at a bank or credit union. You can request a preapproval from multiple lenders, which is a smart way to get the best deal possible. Some lenders, such as LightStream, even have a program where they’ll agree to beat any competitor’s rate you can find that’s lower than their rate.

If you are preapproved, the lender will tell you how much financing you qualify for, your loan APR and term. Now, you know exactly how much car you can afford before you start shopping for a particular model.

Why go through all that trouble before you head to the car lot? We’ll cover the benefits of approval next.

7 advantages of getting preapproved for a car loan

You know exactly how much car you can afford
You might try for a preapproved auto loan and find out you could actually borrow more than you thought, and get a better car than you planned. The reverse could be true, too. You could apply and find out you could only borrow some of what you thought. Either way, you’ll better know the vehicle price range you should be considering.

Remember the maximum loan amount the lender tells you that you’re preapproved for means just that — that’s how much the lender will give you to cover all the expenses of buying a car, not just the car’s sticker price. You have to account for the taxes and fees that will be charged as well. So if a lender tells you you can borrow a maximum $20,000, you should probably look for a car around $17,000, depending on your state’s taxes and fees.

You have the upper hand during negotiations
When you are preapproved for financing, you’ll know what you qualify for in terms of APR, so the dealership won’t be able to charge you a much higher APR. In fact, you’ll be able to tell the dealership you already have a loan preapproval, and challenge them to beat it and find a lower APR loan for you. This is a huge advantage over anyone who’s walking into a dealership without financing first.

You’ll know your rate and your monthly payment
If you know how much your loan will cost you, not just how much the car itself will cost, you can figure out your budget more accurately.

So if you think you’ll borrow $20,000 for 60 months, dividing it means your estimated monthly payment is $333. But that’s the monthly payment on the car; it doesn’t include the loan interest. If you know your APR is 5%, you can figure your actual monthly payment will be $350 by using an auto loan calculator like this one on LendingTree, the parent company of MagnifyMoney. (Note that some calculators have built-in assumptions with location and credit score that might give you a slightly higher payment than doing the straight math.)

A lot of the work can be done ahead of time
It’s hard to focus on paperwork and numbers when you’re tired from spending hours negotiating with a salesperson and test-driving cars at the dealership. By doing what is arguably the most difficult part of financing a car ahead of time, you’ve done your homework beforehand. All you’ve got to do is show the dealer your loan offer and see if they can beat that deal. Whether they can or not, you know you’re walking away with a good deal.

You’re not tied down to any one dealership
Getting preapproved for an auto loan gives you more freedom and time to check out different dealerships. By not being dependent on a dealership for financing, you can comfortably check out multiple dealerships if you want. With an auto loan preapproval, you know what your loan offer will be like without waiting for a dealership’s lender partners to respond.

You have a plan B
If the dealership isn’t able to beat your auto loan pre-approval or find a good offer, you shouldn’t be worried, because you already have an offer. Having a preapproved auto loan takes stress off you by serving as a fallback in case the dealership isn’t able to find a good loan offer for you or beat the one you have.

Less stress
Overall, having a preapproved car loan offer lessens the stress of making such a major purchase. You’re able to know what you qualify for, plan your budget and do the work ahead of time so you aren’t pressured to get everything done in one day. And you know you won’t be fooled into paying a higher APR than you deserve.

Where to find a preapproved auto loan

A lot of lenders offer preapprovals for auto loans, but not all. Check online to make sure the lender you want to apply to offers preapprovals. Banks, credit unions and online lenders could all be possible sources. You may want to start with your current bank to see what kind of deal they offer but typically, you can find the best rates at online lenders and credit unions. It won’t hurt your credit to apply to multiple lenders, as long as you do so within a 14-day window.

Here’s a list of the best auto loans in 2018 if you want to check them out. Most preapproved loan offers are good for one month, so don’t start applying if you’re not ready to buy a vehicle within a month from the time you complete an application.

It’s smart to apply to a few places so you can compare offers. Don’t just do one and think that’s the best you can get. If you would like to compare to multiple offers at once, you can check out LendingTree, where you could possibly be matched with up to five lenders.

Applying for auto loan preapproval

To get preapproved for an auto loan, you’ll need to have some information on hand for the application.

  • Personal details, such as address, date of birth and Social Security number
  • Employment information: where you work and how much you make each month
  • A basic idea of the vehicle you want, like if you want a new car or a used car
  • Loan information, such as how much you want to borrow and for how long
  • Account data: how much you have in your checking and savings account, and any other accounts, such as stocks, bonds and debts

What’s next? Buying a car with a preapproval

Take the preapproval with you when you go to officially pick out and buy your vehicle. Most preapprovals are good for 30 days. If you don’t use it to get a car by expiration date, you’ll have to apply again. Once you know exactly which car you want, you could do a couple of things.

The first is that you could tell the dealership about your preapproved auto loan and see if the dealer could beat what you already have. If the dealership can’t beat it, or if you already shopped around for your preapproval and know you want to go with that lender, then let your preapproval lender know exactly which car you want by contacting them on the phone or online. The lender will ask for a bunch of information on the car, such as the year, make, model, mileage and VIN.

Based on the car you want, the lender will tell you the final numbers with taxes and all, and guide you through finalizing the loan.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at jennifer@magnifymoney.com

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Auto Loan, Reviews

The 6 Best Auto Loans for Buying a Used Car

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Save time & money at the dealership by
getting pre-approved for your car loan today!

Compare auto financing offers

Shopping for used cars can be tricky. Not only are you trying to avoid buying a lemon, you are looking for just the right model year, mileage, and price.

While all of these variables can make car shopping stressful, there are a couple of things you can do to simplify the process.

First, decide exactly how much you can afford to spend on a used car. Look at your budget and determine the absolute maximum your monthly payment can be. Also be aware of your total debt payments when compared to your income. Generally speaking, the total of all your debt payments – auto loans, student loans and mortgage – should not exceed 50% of your income. Make sure to factor your auto payment into the calculation.

Next, shop online for the best used-auto loan rates and get pre-approved for the most attractive offer for which you are eligible. In order to strike the best deal possible on your used auto, it is best to walk into the dealership with financing already in hand.

Once you get to the dealership and find the car you want, negotiate the price of the car before telling the salesperson that you are approved for financing.

[Borrow Before You Buy a Car]

How To Apply

When shopping online for a used auto loan, the application process is very similar to that of a brick-and-mortar bank, but more streamlined. In general, be prepared with:

  • Your contact information: Name, address, phone number, email address
  • Vehicle information (if known – required for lenders that do not offer online preapproval) Make, model, mileage, VIN, dealership information.
  • Financial Information: employment information, gross income and expenses

The Best Auto Loans for Used Cars

LendingTree

With LendingTree, you can fill out one short online form and see real interest rates and approval information instantly. There are hundreds of lenders on LendingTree ready to compete for your business.

It is important to note that some lenders will do a hard pull on your credit and this is normal within the auto lending space. Keep in mind that multiple hard pulls will only count as one pull, so the best strategy is to have all your hard pulls done at one time.

Disclosure: LendingTree is the parent company of MagnifyMoney.

LendingTree

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LightStream

LightStream offers auto loans for used cars online with APRs ranging from 3.09% to 7.94%. It’s terms range from 24 to 84 months, it can finance $5,000 - $100,000, and it charges no origination fee. Before setting foot in a dealership, and if you are approved, you could receive funds into your bank account in as little as 1 business day. The funds can be used on any vehicle, from any dealership, with no restrictions concerning the year, make, model, or mileage of the vehicle you buy.

The 3.09% APR is dependent upon enrolling in AutoPay. If you choose not to enroll in AutoPay, your rate will be 0.50% higher, starting at 3.59%. While rates from LightStream start at 3.09%, they do depend upon the amount financed, and the financing term.

Because LightStream offers no telephone customer support, it offers a guarantee that you will love its service, from start to finish. If you aren’t completely satisfied with your experience, $100 will be deposited into your account, provided you fill out a questionnaire about your experience within 30 days of closing on your loan.

LightStream

APPLY NOW Secured

on LightStream’s secure website


PenFed

Pentagon Federal (PenFed) Credit Union offers rates as low as 3.74% on used auto loans for $500 - $100,000. It will finance terms of 36 to 72 months and charges no origination fee. Rates are dependent upon the amount financed, and the terms financed for, as shown in the chart below:

APR as low as*

Term

Loan Amount

Approx.
Loan Pmt.($20,000 Loan)

3.74% APR

36 months

$500 to $100,000

$588.17

3.99% APR

48 months

$7,500 to $100,000

$451.49

4.24% APR

60 months

$10,000 to $100,000

$370.5

4.74% APR

72 months

$15,000 to $100,000

$319.69

Rates as of April 1, 2018

Because PenFed is a credit union, you will need to join in order to apply for an auto loan through it, but anyone can join by making a one-time donation to Voices for America’s Troops ($14) or National Military Family Association ($15). Also important to note is that even though the loan is entirely online, PenFed does not offer online pre-approval.

In order to apply, you’ll need the following information about the vehicle you will be purchasing:

  • Year
  • Make
  • Model
  • Mileage
  • VIN
  • Dealer or private party information

Once approved, the loan proceeds will go directly to the vehicle’s seller, rather than into your bank account.

PenFed Credit Union

APPLY NOW Secured

on PenFed Credit Union’s secure website


Capital One

Capital One offers auto loans with rates as low as 3.89% for new vehicles and 4.48% for used vehicles. Their terms range from 36 to 72 months. It can finance $4,000 - $40,000, and has no origination fee. Capital One also offers online preapproval through its Auto Navigator. You can then use the funds at any of 12,000 approved dealers. Proceeds from the loan will be sent directly to the seller, rather than deposited into your bank account.

Rates are dependent upon the financing terms, and subject to credit approval, as seen in the chart below:

Financing Type

36 mos

48 mos

60 mos

72 mos

Purchase New Vehicle

APR as low as

3.89%

3.89%

3.89%

3.89%

Purchase Used Vehicle(Dealer)

APR as low as

4.48%

4.63%

4.63%

4.83%

Capital One

APPLY NOW Secured

on Capital One’s secure website


NEFCU

NEFCU is a credit union offering auto loan for used cars with rates as low as 2.84% for used vehicles. It can finance up to $70,000 for 12 to 84 months with no origination fee. NEFCU does not offer online preapproval.

NEFCU offers a $300 coupon offer valid at select dealers on your new or used auto.   You can apply online, at a branch or by telephone by calling 1-800-99-NEFCU. Your rate will be determined by creditworthiness, loan amount, year of the vehicle, and loan term, as per the rate chart.

In order to apply for an auto loan from NEFCU, you must be a member. You are eligible for membership with NEFCU if you:

  • Live in Nassau and/or Suffolk Counties
  • Work in Nassau and/or Suffolk Counties
  • Worship in Nassau and/or Suffolk Counties
  • Attend school in Nassau and/or Suffolk Counties
  • Regularly conduct business in Nassau and/or Suffolk Counties
  • Family Sponsorship – An existing NEFCU member can sponsor in an immediate family member (mother/father, brother/sister, child, grandparent or grandchild) or any household member
  • Membership is not open to individuals who live, work, worship, attend school and do business exclusively in East Hampton, Southampton and Shelter Island.
  • If you have any questions on membership or eligibility, please contact us at 516.561.0030 or at 800.99.NEFCU outside LI/NYC or send an email to info@myNEFCU.org. 

Navy Federal Credit Union

Navy Federal Credit Union offers auto loans for used cars with rates as low as 2.59% with terms of 12 to 72 months. It can loan $250 - $500,000 and charges no origination fee. Navy Federal Credit Union does offer online preapproval.

Rates from Navy Federal Credit Union are determined by the car’s model year, as well as the loan term, as seen in the chart below:

Auto Loan Rates

As of: April 1, 2018, 1:00 AM EST

Loan Type

up to 36 mos.
APR as low as*

37-60 mos.
APR as low as*

61-72 mos.
APR as low as*

73-84 mos.
APR as low as*

85-96 mos.
APR as low as*

New Vehicle

2.59% 

2.99% 

3.29% 

4.69% 

5.59% 

Late Model Used Vehicle

2.59% 

3.29% 

4.09% 

Used Vehicle

4.29% 

4.59% 

5.59% 

In the rate chart, new vehicles are year models 2016, 2017, and 2018 with 7,499 miles or less, and the minimum loan amount is $30,000 for terms 85-96 months. Late model used vehicles are described as 2016, 2017, or 2018 models with 7,500 – 30,000 miles. Used vehicles are vehicles (up to 20 years old) with 30,001 miles or more.

In order to apply for an auto loan from Navy Federal Credit Union, you must become a member. You are eligible if you are Active Duty Army, Navy, Marines, Air Force, Coast Guard, Army or Air National Guard, a member of the Delayed Entry Program, a Department of Defense (DoD) Officer Candidate/ROTC, a DoD Reservist, or a retiree from any of these service branches. You are also eligible as a civilian if you are a DoD civilian employee, a U.S. government employee assigned to a DoD installation, a DoD contractor, or a DoD retiree. Finally, if you are the immediate family member of anyone eligible to join, you are also eligible to become a member.

After loan approval, the proceeds will be sent directly to the dealership, rather than deposited into your bank account.


 You Should Shop Around

Often concerns arise about the effect of shopping around for auto loans on your credit score. However, all inquiries within a 30-day period count as one inquiry on your credit report, so as long as your shop used auto loan rates within a 30-day period, those inquiries will only have a minimal impact on your credit score

Check other auto loan offers here.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Gretchen Lindow
Gretchen Lindow |

Gretchen Lindow is a writer at MagnifyMoney. You can email Gretchen at gretchen@magnifymoney.com

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Auto Loan, Reviews

Capital One Auto Loan Review

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you’re going into a dealership without first shopping around for an auto loan, then you may be leaving money on the table. That’s because the dealership may not offer the best rate, so you may be driving your newly financed car with a less-than-attractive APR.

The prevalence of online lenders makes the preapproval process super simple. If you do get preapproved, you’ll increase your chances of negotiating a better price for the car you want, and the dealership may even try to beat other loan offers. With any loan, shopping around is always recommended. Here we’ll look at the Capital One auto loan, its details and how it compares to others. We’ll also go over how to apply for one.

What is Capital One?

Richard D. Fairbank founded Capital One in 1988, and the bank is headquartered in McLean, Virginia. Capital One is now one of the largest banks in the U.S. based on deposits, and it offers personal banking products including deposit accounts, credit cards and loans, as well as small business and commercial banking products.

Capital One auto loan details

Capital One’s Auto Navigator program offers APRs for new cars as low as 3.89% and used cars as low as 4.48%. The rate you receive will depend on the loan term, your credit history and loan-to-value ratio. Financing terms range from 36 to 72 months (three to six years). You can finance depends on the value of the car you intend to purchase from $4,000 - $40,000. This amount could include the sales price, tax, licensing fees and other optional products like an extended warranty from the dealer.

Capital One’s loan program serves people who want to purchase a new or used vehicle, including minivans, SUVs and light trucks intended for personal use. It does not allow borrowers to finance other types of vehicles such as RVs, boats or motorcycles, as well as certain makes of vehicles. The car you intend on purchasing must have less than 120,000 miles on it, and the model year has to be 2006 or newer, with the exception of some states where it needs to be at least a 2008 model.

To get a loan, first request prequalification, and if you get it, present this offer to the dealer. You’ll then fill out a credit application at the dealer so Capital One can match the loan terms, once the participating dealer submits it. To prequalify, you need to be at least 18 years old with a valid U.S. address and a minimum monthly income of $1,500 or $1,800, depending on your credit situation.

How it stacks up

Where Capital One auto loans stand out

  • Competitive rates: Capital One offers rates on par with other major retailers. Though its rates are slightly higher than what credit unions offer, it’s important to remember that some of those institutions have strict membership requirements.
  • Range of terms: You get a choice of four financing terms ranging from 36 to 72 months.
  • Choice of dealerships: You can choose from 12,000 participating dealerships to purchase a vehicle of your choice.
  • No prepayment penalties: You can pay more than the minimum balance due and won’t face any fees. If you choose, you may be able to shorten the loan term if you pay off your remaining balance.
  • Online preapproval: Capital One offers an easy to follow application process to find out how much you could finance.

Where Capital One falls short

  • Low maximum loan amount: Other competitors offer loans up to $100,000, which could come in handy if you’re looking to purchase a pricy vehicle.
  • Financing only valid at eligible dealers: Capital One doesn’t finance vehicles bought through private party sellers or auto brokers. You also can’t use financing for a lease buyout.
  • Can only borrow a maximum of 80% of the vehicle value: Borrowers need to have a loan-to-value ratio of 80% or less.
  • Not all vehicles qualify: You can’t finance recreational vehicles, including motorcycles, ATVs and RVs. Capital One also doesn’t finance vehicles for commercial use.

How to apply

To get auto financing through Capital One’s Auto Navigator program, first fill out an application to see if you prequalify for a loan. On the first page of the form, it’ll remind you of the terms of the loan, such as the minimum and maximum loan amount and the condition of the car you’re looking to purchase. You’ll need to fill in your personal information such as name, birthday and Social Security number. Then you’ll be asked to provide employment and residence information before submitting the form. Documents you may need to provide include a utility bill in your name dated within the last 30 days as proof of residence and a recent pay stub as proof of income.

Once you’re qualified, you can head to more than 12,000 participating dealers to search for cars. You can browse online and save the listings for your favorite cars for up to 30 days. For most listings, you’ll be able to see the advertised price and financing terms. Those terms are based on what you prequalified for, and you get to see the APR and monthly payments specific to you. You can customize loan options such as the down payment amount, loan term and even your monthly payments.

At the dealership, you can negotiate the price of the vehicle and tally up the total costs including taxes, sales price and licensing fees. You can still make any changes to your loan offer and review the financing terms before completing a credit application at the dealer.

Capital One will keep your prequalification offer for 30 days. You can use your offer at the dealership up to the date of expiry. After that, you’ll need to submit another application form.

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on Capital One’s secure website

The fine print

Capital One makes information readily available on its website. It clearly outlines the application process from start to finish, including terms related to loan amounts and other financing terms. On its auto loan page, Capital One has a detailed frequently-asked-questions section that offers transparent information. Before you even decide whether to get preapproval, you can use the calculator on their auto loan page to see how much you could be paying.

Here are also a few other things to note:

  • You can’t purchase Oldsmobile, Daewoo, Saab, Suzuki or Isuzu vehicles with Capital One financing.
  • Auto financing is based on a simple interest loan. Your payments will be applied to interest first, then the principal. If you pay more than the minimum monthly payment, the money will go toward interest, outstanding fees then the principal.
  • You may need to provide additional documents before finalizing your loan. Capital One offers borrowers the option to upload these items before going to the dealer, or bring them along when purchasing the vehicle.
  • The Auto Navigator website can’t guarantee that the dealer will have the actual car and sale price advertised. You’ll need to ask the dealer about availability.
  • Once you purchase a vehicle, it’ll become a retail installment contract, stating that the dealer is the original creditor.
  • You may need to put down cash if the total cost of the vehicle is more than your maximum loan amount. This includes the amount after you trade in a vehicle, if applicable.

Comparable auto loans

LendingTree

With LendingTree, you can fill out one short online form and see real interest rates and approval information at once. There are hundreds of lenders on LendingTree ready to compete for your business. Some lenders will do a hard pull on your credit and this is normal within the auto lending space. Keep in mind that multiple hard pulls will only count as one pull, so it is smart to have all your hard pulls done at one time.

Disclosure: LendingTree is the parent company of MagnifyMoney.

LendingTree

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PenFed

This credit union requires you to become a member in order to apply for an auto loan, but it’s easy to join. All you need to do is to make a one-time donation to the National Military Family Association for $17 or the Voices for America Troops for $17. Then, you’ll need to fund your share account with a minimum of $5.

PenFed offers rates as low as 2.49% APR for new cars and as low as 3.74% APR for used auto loans, both loan amounts are from $500 - $100,000. Terms range from 36 to 84 months for used vehicles and 36 to 72 months  for new ones. Rates depend on how much you finance and what term you choose.

If you’re looking for lower monthly payments, PenFed offers a Payment Saver auto loan for new and used vehicles. You can make a lower payment than a conventional auto loan, but at a higher interest rate. You’ll pay back the remaining balance at the end of your loan. For new vehicles, they must never have been titled and be the current or prior model year. For used vehicles, it can be anywhere from the prior two years up to the current model and can’t exceed 15,000 miles per year.

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on PenFed Credit Union’s secure website

Lightstream

A division of SunTrust Bank, Lightstream offers loans for new and used cars with terms ranging from 24 to 84 months (two to seven years). It offers APRs from 3.09% with a loan amounts $5,000 - $100,000. This APR only applies to those who are enrolled in automatic payments. If you don’t enroll in autopay, you’ll pay an extra 0.50% APR. Your actual rate will depend on the financing term, the amount you take out and your credit history.

You can use the funds for any type of vehicle, with no restrictions on the dealership or the model, make or mileage on the car. You can also use the loan to purchase new or used motorcycles, lease buyouts and vehicles from individuals. Unfortunately, you can’t get a preapproval, meaning you’ll need to complete and submit a loan application online. The benefit is that if you’re approved, you may be able to receive the money within one business day.

Lightstream offers a guarantee that you’ll love their service. If not, they’ll email you a questionnaire for you to fill out within 30 days of loan closing. Once completed, they’ll deposit $100 into your account.

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on LightStream’s secure website

Bank of America

Bank of America is one of the largest banks in the U.S. and it provides a wide variety of banking, investing and loan products and services. Their auto loan program is for dealer purchases, lease buyouts and purchases from another individual. You can’t use their financing for recreational or commercial vehicles. If you’re not purchasing a vehicle from a private party, Bank of America only allows you to purchase cars from franchise dealers or one of their approved independent dealers.

Rates for their loans start from 3.59% APR for new cars, 3.89% for used cars. If purchasing a car from an individual, you can apply for a private party loan by visiting a financial center. Preferred Rewards clients are eligible for a rate discount. Gold customers get a 0.25% discount Platinum 0.35% and Platinum honors a 0.50% discount. You can choose from loan terms from 12 to 75 months, but you can only choose either a 48-, 60- or 72- month option online. Once you submit your application, you can contact Bank of America to request a different loan term.

You will need to borrow a minimum of $5,000 (or $7,500 if you reside in Minnesota or South Carolina). The vehicle you intend to finance can’t have more than 125,000 miles, be older than 10 calendar years or valued below $6,000. Once you apply, Bank of America claims you’ll get a response within 60 seconds. If approved, your rate remains valid for up to 30 days.

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on Bank Of America’s secure website

U.S. Bank

US Bank offers loans for new and used vehicles with rates starting at 3.49% APR for online and branch applications. If you are an existing U.S. Bank customer and set up automatic payments from a U.S. Bank consumer checking package account, you’re eligible for a 0.50% rate discount. For used cars, you can only finance a car six years old or newer and with no more than 100,000 miles.

If you intend on purchasing an eco-friendly car, you may be able to save some money by taking advantage of the Green Auto Loan Rate discount. This is only for new or used EPA-certified SmartWay vehicles. These include hybrids or high gas mileage cars. You will get a 0.50% rate reduction once you set up automatic payments from a U.S. Bank package and complete the Green Vehicle Affidavit. You can find out which cars qualify by using the EPA Green Vehicle Guide.

With all loans, you do need to pay an origination fee, which can be anywhere from $50 to $125 or up to 1% of the financed amount, depending on your state.

LEARN MORE Secured

on US Bank’s secure website

Bottom line

Capital One’s Auto Navigator program is best for those who want a competitive rate on new or used vehicles. For those who have a good credit history and are in a sound financial situation, there’s the added benefit of no prepayment penalties. That way, if you choose to pay off your loan early, you won’t need to pay extra. If you already have a car in mind, Capital One is still a great option to consider, as long as the dealership is on their approved list. With its easy online application process and the ability to tweak the terms of the loan, Capital One offers great terms and rates. However, if you’re not considering buying from an approved dealer, or if you’re looking at commercial or recreational vehicles, you’ll want to look elsewhere.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Auto Loan, News

5 Reasons to Ditch Your Car in 2018

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Rising gas prices and car insurance premiums could make owning a car more costly in 2018 than the previous year. But there are also more alternatives for getting around as ride-sharing and car rental options challenge traditional methods of transportation.

If you’re wavering between owning a car or not, or selling your family’s second vehicle, these five reasons may sway you to ditch your auto in 2018.

1. Higher prices at the pump

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The 2018 American gas bill may eclipse 2017’s total by $25 billion, according to GasBuddy, a website and app that tracks and analyzes gas prices in real time. The total gas bill is expected to reach $364.6 billion in 2018, with average household spending $1,765 on gasoline during the year, compared with $1,898 in 2017, GasBuddy projects.

While several factors affect the price at the pump, volatility is a constant concern in the event of major storms or other natural disasters. Policy, demand, inventory and state tax regulations also affect prices, says Dan McTeague, GasBuddy’s senior petroleum analyst.

“It is going to be a much more expensive year for Americans,” he said.

In January, average gas prices in the U.S. reached $2.54 per gallon, exceeding GasBuddy’s expectations of a high of $2.53 for the month. The increase in prices will become more noticeable, especially during the driving season, which is April to September, McTeague says.

2. Climbing car insurance premiums

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The consumer price index for motor vehicle insurance increased 7.9% in 2017, on top of a  7% increase in 2016, according to January 2018 data from the U.S. Bureau of Labor Statistics.

Car insurance premiums are expected to continue rising. Increases were as high as 15.3% from 2015 to 2016, according to a 2017 analysis by financial site ValuePenguin, using data from SNL Financial.

Companies haven’t been able to close the gap in a large part due to covering damages after natural disasters and the steady climb in collision rates, which has been growing since 2011, Rieman says.

So, the safer drivers with clean records are paying higher premiums, even though they may not have made a claim.

3. Ride-sharing revving up

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The ride-sharing industry has dramatically shifted in the past 10 years as services like Lyft and Uber make it easier to get around without owning a car. You can grab a ride when you need it, and even though there’s a cost, you don’t have to worry about the monthly payments, gas, insurance or repair expenses that come with owning a car.

Also, you can pay using pretax commuter benefits, which are provided by some employers to use for transit and biking, Uber Pool or Lyft Line rides.

And you can feel good knowing you’re helping the environment.

A 2017 study published in the Proceedings of the National Academy of Sciences examined the ride-share industry using New York City taxi data. The algorithm used showed carpooling options can reduce the number of cars on the road, as well as a reduction in wait time of only 2.8 minutes in New York City.

Ride-sharing appears to have sobered up the numbers of drunk driving accidents, too. For example, prior to Uber’s entry in Seattle, 2,750 people were arrested per year for driving under the influence. The company reported in 2015 that its “entry into the Emerald City was associated with a 10% decrease in DUI arrests.”

4. Short-term rentals are on the rise

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Giving up a car may seem like you are losing your freedom. But you can take the step, knowing that short-term rental is an option, whether you suddenly need a vehicle to get around town or want to take a road trip.

Short-term rental options challenge ownership and rental methods because you can pay as you go.

Customers can rent cars for short periods of time, such as by the hour or minute, from collection points generally within cities, according to the Rethinking Mobility report.

Zipcar, a subsidiary of Avis Budget Group, has a fleet of 12,000 cars in 10 countries in over 500 cities. Users, which include travelers who need to make that last leg to the hotel and locals on a weekend road trip, can rent wheels of any kind for as little as 30 minutes. The first 180 miles and gas are included, then 45 cents is tagged to each additional mile. Cars are available 24 hours a day.

This kind of car rental service is based on a European system as a sustainable solution to problems like congestion and pollution, the company says.

“Most members use Zipcar as an alternative to owning a car and want the freedom of access to a car without the hassles of owning a car, like finding parking and paying for gas and maintenance,” said Katelyn Chesley, a Zipcar spokeswoman.

Reservations last between 30 minutes and 14 days with hourly, monthly, daily and yearly rates, depending on the frequency of use.

Another option is peer-to-peer car share models, like Airbnb for vehicles. Choices include Turo and Getaround, where you can rent a car from an owner without going through a traditional service. The idea is that car owners put their idle car to use and renters have options without committing to a car full time.

5. Walking and cycling can lead to healthier, happier lives.

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Major metropolitan areas across the U.S. are finding ways to discourage sprawl and offer convenience for people to travel via rail, bike or foot. The Atlanta Beltline, for example, is a major project using 22 miles of a former railway corridor to link neighborhoods and give people options for biking and walking to work, shopping and other activities.

The most walkable places have a higher educated workforce and higher social equity, according to a 2016 study by the George Washington University School of Business.

A study conducted by university researchers in the U.K. found that commuting by cycling and walking lowered the risk of cardiovascular disease. “Initiatives to encourage and support active commuting could reduce risk of death and the burden of important chronic conditions,” according to the 2017 study.

Walking could make you happier before and after work, too. Another U.K. study found that people who started walking or cycling for their commute instead of driving improved their overall well-being. Specifically, those commuters didn’t feel as much strain as those who drove and were better able to concentrate, according to the 2014 study by researchers at the University of East Anglia and the Centre for Diet and Activity Research in England. The report analyzed 18 years of data on nearly 18,000 commuters in Britain by looking at psychological health factors, such as unhappiness.

The relationship between rail transit and walkable urban places is strong, with 65% of the walkable urban places served by rail transit service, according to a 2016 report by the Brookings Institution, a Washington, D.C.-based nonprofit public policy organization.

“So many towns have the structure in place to be walkable,” said Rachel Quednau, communications director at Strong Towns, a national nonprofit that provides resources for towns and cities to create walkability options.

“Some of the biggest changes and simplest are to begin narrowing streets and roads so they’re more walkable, cars drive slower and it’s safer to walk,” she said.

 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Maggie Scruggs
Maggie Scruggs |

Maggie Scruggs is a writer at MagnifyMoney. You can email Maggie here

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Auto Loan

How to Buy a Car Online — from Start to Finish

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Walking onto a car dealership lot can sometimes feel like an experience straight out of a horror movie. Before you’ve even made it a few feet, car salesmen descend upon you like vultures, urging you to make spur-of-the-moment decisions that can bury you in debt up to your eyeballs for the next half-decade.

There has to be a better way. According to a 2015 survey by the research firm Accenture, 53% of people “would consider buying a car online.” And, according to the firm, 16% of people already have.

Buying a car online can be a much smoother experience and lead to better, more well-informed outcomes. But, it does require a bit more legwork on your part (at least digitally). In this guide, we’ll walk you through how the online car buying experience compares with the traditional route and the exact steps you need to know to buy a car online. Finally, we’ll show you what to watch out for to stay safe.

Following the steps in this guide can help ensure that you don’t get taken for a ride when buying your next car online.

Traditional vs. online car buying

Before the internet revolutionized everything, there really was only one way most people bought a car. They’d visit car lots, find a car they liked, and then sit down with a car salesman to work out an agreement. This lead to the dreaded negotiation process.

“There’s all this back-and-forth and, ‘Oh, I’ve got to go talk to my manager,’” said Jack Gillis, director of public affairs at the Consumer Federation of America and author of “The Car Book.” “Well, the guy goes back and has a cup of coffee and lets you sit there and steam for a while, then he comes back and gives you some song and dance about why they can or can’t do something.”

Because most people treated car dealerships as a one-stop shop for buying a car, they often wouldn’t be informed about the full range of available cars, financing options or trade-in options available to them. Without these bargaining chips, consumers are at the mercy of the car salesmen.

“It’s like a lamb being led to slaughter,” said Gillis.

What if someone could wave a magic wand and take away all those painful points? With online car buying, it’s possible to complete nearly every phase of the car-buying experience — from finding the right car to negotiation — entirely online.

In this guide, we’ll talk about the pros and cons of buying a car online and how it compares to traditional car buying.

While removing the painful points of dealing with hawkish car salesmen is certainly nice (especially for introverted folks who have a fear of negotiating), perhaps the biggest benefit of buying a car online is that it puts you in control of the car-buying process.

You’re no longer at the mercy of the salesmen at one dealership. You can expand your options for cars, financing and trade-ins, and use these as bargaining chips to negotiate for the best price possible.

“The whole digital part really is empowering for the buyer because there’s so much information that you can use to make an informed decision,” said Matt DeLorenzo, managing editor of KelleyBlueBook.com.

The downside of all this power is that it requires a bit more digital legwork on your part to bring all the pieces together. But, as we’ll see, it’s not rocket science. Doing your homework can literally save you thousands of dollars and ensure you get the best car possible.

Follow these seven steps to buy cars online

Step 1. Choose the right car

It’s important to choose a type of car that will fit your needs best. Do you want a very fuel-efficient vehicle for short commutes? How about hauling large amounts of cargo around? Do you have a large family, or a small one? Questions like these can help you zero in on what kind of body style (truck? SUV? compact car?) will suit your needs best.

Once you narrow down a body style, it’s time to research what specific makes and models of cars might be best for you. Consumer Reports offers comprehensive reviews of cars by make, model and year, however, it does charge a small monthly or annual fee. Other good websites to do research on specific types of cars include Edmunds, Car and Driver and Kelley Blue Book.

If you’re buying a new car, you might be offered certain options and add-ons from the dealer, such as VIN window etching or rust-proofing. Before you go signing up for every option offered (and sign away your whole paycheck in the process), it’s important to research these options.

According to a 2017 report from the National Consumer Law Center, the average markup on these add-ons is 170%. If you really do need these optional add-ons (and you probably don’t), perhaps it’s better to get it done yourself.

Step 2. Determine the price you want to pay

Next up is determining how much car you can actually afford. A good rule of thumb is the 20/4/10 rule:

  • 20: Make a minimum 20% down payment.
  • 4: Finance for no more than four years.
  • 10: Monthly transportation expenses shouldn’t exceed 10% of your monthly income (including insurance, gas, car payments, etc,)

This rule of thumb will help you set a cap on your car-shopping budget. For example, if you have $3,000 saved, it might be a good idea to avoid buying a car for more than $15,000 ($15,000 * 0.20 down= $3,000). From there, you can assess any financing offers to make sure that you’re not spending more than 10% of your income on the car, and that your financing doesn’t stretch out past the four-year mark.

You can narrow your car search down even further using these budget caps. If you know that the MSRP of a particular new car is far outside of your budget, you can weed it out of consideration. You can use websites like Kelley Blue Book or the National Automobile Dealers Association to research the current prices for new and used cars in your area.

Step 3. Get approved for financing online

Traditionally, you’d walk into a dealership and tell the car salesman your monthly budget. Then, the car salesman would work out the final purchase price and the financing to give you one, final monthly payment number.

According to Gillis, this is one of the surest ways to pay more in the long run.

“The dealer will ask, ‘Listen, what if I can get you out the door for $325 a month?’ [but] you have no idea what you’re really paying for financing,” he said. “You may be getting into a financial arrangement that is more expensive than if you had shopped around.”

That’s why it’s especially important to get preapproved for an auto loan before you actually go shopping. Getting preapproved for a loan does not mean you have to take the financing; rather, it helps you stay within your budget and gives you a bargaining chip in negotiations.

You can easily get preapproved for an auto loan online through websites like LendingTree, which is the parent company of MagnifyMoney. Using our auto loan marketplace, you can fill out one short online form and potentially get offers from several auto lenders at once. It’s also a good idea to check around with local banks and credit unions, which may offer deals to you locally.

You’ll generally need a high credit score to qualify for the best auto financing offers that banks love to advertise. If you don’t have a high credit score, you will still often be preapproved for the loan, however, it may come with higher interest rates. If you’re outright denied for a preapproved loan, you may need to consider shopping elsewhere or waiting a little while so you can take steps to increase your credit score.

If you are qualified for pre-approval, the lender will give you a pre-approval letter. Make sure to keep a copy of this letter, and bring it with you to the table when it comes time to negotiate a price on the car you’ve chosen.

Step 4. Choose the right source

It’s now time to cast your net and see what cars are out there.

AutoTempest is a comprehensive website that proclaims to be the Kayak.com of cars: it searches several websites for specific makes and models, including on Craigslist. If you’re looking for one particular brand, don’t overlook your local dealership’s website. Other possible websites to scope out cars include:

Luckily, with the power of the internet, the whole world (or at least the whole country) can be your virtual car lot. If you’re able to travel to pick up your new vehicle, you might be able to save a trunkful of cash by broadening your search.

For example, if you live in a snowy climate and are looking for an all-wheel drive car, you might try looking in a warmer area. “There might be better incentives on all-wheel drive cars in, say, Arizona than in the Northeast where they got a lot of snow,” said DeLorenzo.

Step 5. Get quotes

Once you’ve identified your targets, the next step is to find out how much they’ll cost. You’ll negotiate the price lower in the next step, but this just sets a starting point.

Oftentimes, dealerships or third-party sellers won’t show you the price of a vehicle online as the price may have changed or the vehicle may have already been sold. That’s why it’s important to contact the dealership directly and ask for a quote for each vehicle you’re interested in.

Email or call the dealership and ask for their internet sales manager: this is the person you’ll be working with through the negotiation process. Give them the VIN or the stock number of the vehicle you’re interested in and ask for a quote. Then, ask them to email it to you so you have it in writing.

It can sometimes be difficult to get a dealership to quote a price. Dealerships may say, “’Oh, I see you’re shopping online, boy that’s great. Here’s what I want you to do. I want you to go and talk to all the other dealers, and then come back to me, and I’ll see what I can do for you.’” said Gillis. “Your response to that is, ‘No, I’m not gonna do that. I want you to give me the very best price you can give me for this make, model, year, and I want you to commit to that.’”

If quote collecting isn’t your thing, you can also hire a service such as CarBargains. For $250 and a detailed description of what you’re looking for, CarBargains staff will collect at least five different dealership quotes for you. According to Gillis, “statistically, about a third of the results actually come in at below so-called manufacturer’s price or inventory price.”

Collecting these quotes gives you the bargaining power you need to negotiate prices as low as possible in the next step.

Step 6. Time to negotiate

Ah, the dreaded negotiation. Since you’ve already gone through all the steps to be an informed consumer, it will be a much smoother process. Specifically, you’ll be negotiating the price of three separate items:

Vehicle price; financing cost; and trade-in value.

Vehicle price

This is the most important piece. You can — and should — play the offers you’ve received in the prior step off of each other. Did someone offer $12,500? Show that emailed quote to another dealer and ask if they can lower their price to $12,000.

Car dealerships are usually very easy to negotiate with online.

“If you think about it from an efficiency point of view, an online salesperson can be working more deals at one time than somebody on the floor who’s physically with one person,” said DeLorenzo. “Sometimes it’s actually more cost-effective for the dealer to sell it through or do a lot of the negotiation online.”

Car salesmen will often try and upsell you on add-ons when negotiating the price for a car. “They may say, ‘Well this will only cost you 10 bucks more a month.’ Well, yeah, and that’s $120 over a year. Over five years that’s $600, $700. You can’t let bells and whistles cloud your judgment,” said DeLorenzo. Stick to the basic numbers and don’t get distracted.

Trade-in price

Chances are that you already have a car you’re looking to trade in and help defray the cost a bit. Most dealerships will accept trade-ins, but be warned: you will probably get much, much less than if you shop around for trade-in prices on your own.

Tools such as Kelley Blue Book also allow you to find out a fair trade-in price for your vehicle. In addition, you can use a tool on their website called “Instant Cash Offer” to get bids from dealers on your car.

“The beauty of having something like that is that it sets a floor for what your car is worth,” said DeLorenzo. “You’ll know you’ll get at least that much in trade or in an outright purchase, and that’s important leverage to have when you’re negotiating a new car deal.”

Additionally, you can try selling your car yourself through websites like Craigslist. Generally, going this route will net you the best price for your old car, although this may take much more time and energy than simply driving onto a car lot with your old car and driving off with a new one.

Financing cost

The final piece of the puzzle is how you’re going to pay for your new car. Since you’ve already taken the time to be preapproved for an auto loan, this step is simple. Show the dealer your pre-approval letter and ask them if they can beat it.

If so, great. If not, then you know you’ve already secured the best auto financing deal possible.

Step 7. Making the final purchase online

Once you’ve lined up the three pieces of the puzzle — the lowest car price, the lowest financing price and the highest trade-in value — it’s time to make your decision.

Most dealerships still require you to physically come in to complete the final paperwork signing. However, that’s beginning to change.

“Savvy dealers are beginning to digitize as much of that kind of paperwork [as possible], to just make it easier to buy a car from them,” said DeLorenzo.

“It works out better for them, too. I mean, if they’re able to get you in and out quicker, they can sell more cars quicker. People have a much more positive view of how the deal went and it’s just good business.”

But as far as completing the entire purchase process online? DeLorenzo said, “I think there are dealers who are willing to do that. The question is, do you want to do that?”

But for now, we still can’t entirely get around some of the physical in-person aspects of buying a car. Perhaps someone will invent a virtual test-drive machine in the future.

Staying safe while shopping for cars online

Luckily, outright scams aren’t too common when it comes to buying cars online, according to Gillis. Many car dealers are subject to consumer-friendly regulation by the Federal Trade Commission.

Beware the bait-and-switch

One situation that Gillis has seen, however, involves a bait-and-switch technique after consumers arrive at the dealership to complete the purchase after negotiating everything online.

Here’s how he describes this common ploy: “You’ve got it all squared away. You get to the dealership to close the deal, and all of a sudden, ‘Oh my gosh. I can’t believe it, someone just came in and bought that car, but we have another one here that actually has a few better features on it, and it’s just the color you wanted, and it’s only gonna cost you $20 more per month.’”

If this happens to you, be prepared to walk away from the dealership — they’re just trying to weasel more money out of you.

While stories like that may be uncommon, there are a couple of things you can do to make sure that you don’t end up regretting your decision.

Get an inspection from an independent mechanic

If you’re buying a used car, whether at a dealer or from someone you found on Craigslist, you should absolutely get an inspection first. Everyone has heard horror stories about buying a lemon (or worse, been the person who bought the faulty car). The seller will surely tell you that the car is in perfect shape, but how do you really know? Getting an auto inspection by an independent mechanic is perhaps one of the best ways to protect yourself.

If you’re unable to take the car to your own mechanic, DeLorenzo recommends a great service from AiM Certify. For as little as $129, you can book an independent mechanic anywhere in the country to travel to the dealership and perform an inspection for you. You’ll get back a full mechanical report complete with actual photos of the car (not gorgeous stock images that seem to plague dealership websites).

Try before you buy

“Most of the problems that consumers end up not liking about their vehicles could have determined in a test drive,” said Gillis. “For example, it’s hard to park, or the back seat really isn’t that comfortable, or the trunk really doesn’t hold that much, or ‘when I’m changing lanes, there’s a big blind spot in the back.’ So that’s why that test drive is really, really important.”

If you’re not happy with your choice, you may have wasted tens of thousands of dollars. “It’s not like buying a pair of shoes from Amazon,” said DeLorenzo. “It gets a little bit more involved if the car doesn’t fit you and you try to send that back.”

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Lindsay VanSomeren
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Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Auto Loan

How to Finally Pay Off Your Car This Year

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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A car is the second-most expensive thing most of us will ever buy. And it’s getting pricier: The average loan amount for a new vehicle is $30,621 and U.S. residents owe more than $1 trillion in car debt, according to Experian’s 2017 “State of the Automotive Finance Market” report.

We’re also getting deeper into auto debt over longer periods of time. The number of people borrowing longer-term loans (73 to 84 months) increased by 10% since the previous year’s report. Not only do these extended loans mean more interest paid, they also eat up consumer income for too long.

“You can handle $400 a month today, but what happens if you lose your job or have to move?” said Sonya Smith-Valentine, a former consumer protection lawyer and accountant who now offers financial wellness training in the Washington, D.C. area.

“Seven years is too much time to be tied into a car loan.”

The obvious alternative to getting stuck with a big auto loan is to pay cash, but not everyone can afford that. Another option is to buy a reliable used car or a less-expensive new car, and finance those loans for shorter periods.

“The more that you end up paying in interest, the less you have in cash flow over your life. That cash flow is what’s going to build your wealth,” said Tara Falcone, a certified financial planner in Princeton, N.J. “If you’re in your 20s or 30s, that (interest) invested over time could be a significant amount of money in the future, when you need it to live off.”

How to finally pay off your auto loan

Paying a loan off early may sound impossible to those whose budgets already feel tight. The following information can reveal options you didn’t know you had.

To make an early payoff game plan, you need to know:

  • The term of your loan and its interest rate
  • Whether the loan agreement includes a prepayment penalty
  • How much you still owe (call the lender for this)
  • The current value of your vehicle (find it on sites like Kelley Blue Book)
  • Your credit score, which will greatly impact your ability to qualify for a loan with better terms

From there, there are a few ways to manage your loan:

Option 1: Refinancing

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If you’re stuck with a high-interest auto loan, you might consider refinancing for a new auto loan with better terms. Banks, credit unions and online financial institutions may be able to get you a new loan with terms more favorable than the original one.

Ideally, the new loan term will be shorter than the current one. The point is to pay off the car note as quickly as possible, in order to pay as little interest as possible.

Depending on your original rate, however, a longer-term loan might still mean less interest paid overall. Falcone knows of a Navy enlistee who financed a car at a dealer for a whopping 24%. Fortunately, she was able to refinance at 7%.

Run your own numbers through an auto loan refinance calculator like this one from LendingTree, the parent company of MagnifyMoney. If your original agreement includes a prepayment penalty or if the new loan would carry an origination fee, you’ll need to factor those into your calculation as well.

If you can refinance at a lower interest rate, early payoff will become easier.

Option 2: The rapid repayment route

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The faster you retire a loan, the less interest you’ll pay. One simple tactic to pay off a loan quickly is to make biweekly payments instead of monthly payments.

If you owe $430 per month, for example, you’d make half that payment every two weeks. Paying $215 every other week (or 26 times per year) rather than the full amount 12 times a year would add up to $5,590 instead of $5,160.

You could also continue to make monthly payments, but pay more than the required amount. An easy way to start is by rounding up. For example, if you owe $389 per month, you could make the payment $400 (or more, if you can).

Where to find the extra money? These tactics can help:

Sell stuff. A game system, designer purse, mountain bike or other rarely used items could bring in decent dollars through eBay, Craigslist or consignment websites.

Write down what you spend. Small, unnoticed expenses can add up fast, says Brian Hanks, a certified financial planner who practices in Salt Lake City. He advises clients to keep track of all expenditures for a month (on paper or with an app). Often, they’re startled to discover how much the things they “don’t get real value out of” are costing them each month – money that could be applied to their loans.

“Once they realize it, behavior can change,” said Hanks.

Get a side hustle. Petsitting, driving for Lyft, a weekend waitressing gig – whatever fits your ability and personality. Or use your professional skill set to become a consultant, looking for work you can do on weekends.

Contribute windfalls. You got a tax refund. Grandma sent you $50 for your birthday. Vacationing neighbors paid you to pick up their mail. Any time additional money shows up, throw it toward your payment.

Ask for a loan. A relative or friend might be willing to help. Draw up an agreement specifying how you’ll repay (weekly? monthly? by cash, check or PayPal?) and then keep to the terms.

Spending freeze. Colorado-based certified financial planner Dan Andrews suggests clients drop one expensive habit (shopping, eating meals out) for 30 days.

“Prove that you have the savings gusto in you for a month,” he said. Then, put the money saved toward the next payment. Often, the spending freeze “reframes what they thought was a ‘need’ into a ‘want,’” said Andrews, who specializes in working with millennials. This means more money for the loan every month.

Before you start making extra payments, talk to the lender. You need to make absolutely sure that the additional money goes against the principal of the loan.

Option 3: Selling and starting over

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Want to get out from under a loan entirely? Let someone else pay it off.

Compare the Kelley Blue Book value to the amount you still owe. If there’s a positive balance – say, you owe $10,000 and it’s worth $11,000 – then put the car up for sale.

Once you have a buyer, ask the lender for the payoff amount: What it will take to pay in full and get the vehicle’s lien released. Smith-Valentine suggests creating a written agreement stating that the third-party buyer will pay the lender directly, and you will sign over the title once you receive it.

You’ll want to have another mode of transportation lined up, of course. Having to carpool or take public transit for a while might be preferable to being deeply in debt. Continue to make your “car payment,” though: Set aside that amount every month for a replacement vehicle. Figure out what you’re not paying for car insurance and add to the car fund, too.

If the agreed-upon sale price doesn’t cover the payoff amount, be prepared to make up the difference. Should you be lucky enough to sell the car for more than it’s worth, use the balance as seed money for a replacement car.

A word of caution about auto trade-ins: You may have seen ads for auto dealers who offer to pay off your previous loan if you’ll trade in the vehicle for a new one. The Federal Trade Commission advises consumers to be cautious about such deals, especially if they have negative equity (aka they’re “underwater” on their loans).

Some of those dealers find ways to include the money owed that in the new agreement – which means you would be financing that negative equity along with the cost of the replacement vehicle. Read the contract very carefully, and ask for an explanation of how any negative equity was handled.

What if you’re underwater on your auto loan?

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Owing more than a vehicle is worth makes it tougher to sell but not necessarily impossible.

If you have savings, make up the difference between what a buyer will pay for the car and what will be left on the auto loan afterward. No ready cash? Look into taking out a small personal loan to pay off the remaining balance. It may be better to owe some money than to be stuck with a large loan for a vehicle that continues to depreciate.

Another possibility: Make extra payments against the principal until the loan balance matches the car’s value, and then put it up for sale. Before you do, check to see if at that point you’ll be eligible for refinancing at a better rate – if you want to keep the car, that is – and if you’ll be able to swing the lower payments.

Should you give back the car?

Suppose you’re underwater, can’t refinance, have no savings and are disgusted with the thought of making payments for years. It can be tempting to just give the car back to the dealer.

Don’t do it. A “voluntary repossession” reduces costs only for the creditor, and will hurt you in the long run.

The now-used car will probably sell for less than the loan balance, and you are required to pay the difference. For example, if you still owe $12,000 and the vehicle sells for $9,000, then you’ll have to come up with the “deficiency” of $3,000. You’ll also be on the hook for other funds, such as fees associated with the repossession, including storage and legal fees.

The lender can sue you for a “deficiency judgment,” which shows up on your credit report. If the account gets turned over to a collections agency, you’ll be hounded nonstop – and the judgment will remain on your credit report until it’s paid. The repossession will also stay on your report for up to seven years, which wreaks havoc on your credit score.

Instead of giving the car back, use the rapid repayment tactics noted above to bring the loan balance closer to the vehicle’s current value. At that point, try selling or refinancing. If you’re financially stressed, Smith-Valentine suggests a longer finance term in order to get a lower monthly payment. That will mean more interest in the long run, but will give you some breathing room right now.

“I’m not a proponent of long car loans. But that’s still better than a repossession,” she said.

Bottom line

Ideally, you’ll be able to pay off your loan quickly, or at least refinance it at a more favorable rate that allows you to put more money toward the principal balance.

Imagine not having a car payment. What could that extra few hundred dollars a month do for the bottom line? Make this the year that it happens.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Donna Freedman
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Donna Freedman is a writer at MagnifyMoney. You can email Donna here

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Auto Loan, News

What to Do if You’re Trapped in a Bad Auto Loan

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Sometimes, you don’t realize you sign a bad deal until you start having to pay for it.

Imagine this scenario: When you walked away from the auto dealer’s lot, you were excited. You had a brand spanking new — or new to you — vehicle. After the hassle of saving for, finding, and finally purchasing your dream car, your financing terms were likely the last thing on your mind. When the dealer sat you down and told you what your monthly payment would be, you did some mental math, figured you could afford the bill, and signed the dotted line. A few months later, you notice your loan could have been less expensive and feel cheated.

What do you do?

“If it’s in the contract and you signed the contract that’s it. You’re stuck with that,” said Anthony Giorgianni, associate editor at Consumer Reports.

If you’re not sure about your financing deal, a good way to evaluate it is by taking a look at the amortization table in the contract you signed, said Jerry Buchko, a Minneapolis-based debt counselor. If you can’t locate the original contract, you can ask for one via email or look for one online and estimate, but it’s most ideal to get it from the lender, and they should have a copy, said Buchko.

The amortization table is a set of tables that shows the total cost of your financing deal assuming all of your payments are made on time.

With the table in front of you, it becomes much easier to see if you’re currently paying more than what your vehicle is worth and if you’ll be in danger of being upside down on the loan (paying more than the vehicle is worth) in the future.

“With that information you should have all you need,” said Buchko. When analyzing and comparing the amortization tables for each loan offer, look for the one offering you the greatest overall savings, he recommended. Take a look at the interest rate you’re currently paying and the length of your loan, and see if you can make any adjustments to your lifestyle in order to save money.

For example, if the interest rate you’re paying isn’t very high, but your financing term is long and you see you’ll hit the ‘underwater’ point before your auto loan is completely paid off, you may want to consider increasing your monthly payments to pay off the loan faster (and get a chance to make money on a trade-in or sale before you can’t anymore).

While you’re looking at the contract, look at everything else it says, like the line items that were financed and any caveats in the terms, like a prepayment penalty that would penalize you for paying off the loan faster, as suggested above. You may also find there are elements of the loan agreement you didn’t really agree to.

“Sometimes the loans are packed with unnecessary things that are really expensive,” said Giorgianni. “If you feel you were misled, then go to the dealer and complain, and to a state agency if they don’t help.”

If you think you were duped into taking on more financing or given an unfair interest rate at the dealership, file a complaint with agencies like the Consumer Financial Protection Bureau, the Federal Trade Commision or the Better Business Bureau. The CFPB and FTC are also two good resources for consumer information on auto financing.

4 options to explore if your auto loan is too expensive

If you realize your auto loan  payments are too costly, the interest rate is too high, or the loan term is too long, you can try taking these steps to get out of a bad financing deal as well as better afford your auto debt.

Option #1: Try to refinance for a better deal

When you’re noticing your monthly auto payment may be too large to fit your household budget, you could try to lower your monthly payment somehow, by reducing your interest rate or lengthening your loan term. You can accomplish either by refinancing your auto loan at more favorable terms to get your payment under control.

If your credit score was lower at the time you financed your vehicle, then you may have been given less favorable loan terms. Understandably, you can’t always perfectly time a car purchase. If you desperately needed a vehicle to get around and didn’t have time to build your credit, your circumstances may have forced you into taking a bad deal. Now, if your credit score has improved or interest rates have gone down, you may have a better shot at reducing your interest rate.

“If it turns out that the main problem with the contract is that your rate is higher than it should have been, then a refinance is a good option but for a shorter or the same period,” said Giorgianni.

When you’re looking to refinance, compare loan offers with several different lenders, like your bank, a local credit union, and online loan search sites. Make sure to compare the final cost to you using the amortization table.

“Take a look at who is out there” said Buchko. “If you see another institution offering a lot better terms, contact them.” He recommends asking for the best loan arrangement you can get to pay off the loan when you contact a lender.

Extending a loan term to save money in the short run isn’t always the best savings strategy. But, if you need your vehicle and you are strapped for cash affording it, refinancing at a longer loan term may prove extremely beneficial. Giorgianni suggests borrowers avoid extending their loan terms unless it’s absolutely necessary — for example, if “you can’t afford the car and it will be repossessed.”

Whatever you do, be careful to make sure that the offer you ultimately decide to go with is as good or better than your current loan offer. If there are any fees associated, take care to factor those in as well as they could drive your monthly payment higher. Pay attention to the total cost you’ll pay and consider passing on the deal if it’s higher than what you’d pay in your current arrangement.

Buchko recommends asking yourself: “Am I meeting a goal of a smaller payment?” and, “Is the overall final cost of the loan going to be worth the smaller payment?”

Option #2 : Negotiate your terms with your current lender

Buchko said he often recommends trying to negotiate your current terms with the lender holding your loan. “Go to the lender you have been working with and see if there is anything they are willing to do to help you,” he said. “It’s much better to work out some sort of arrangement before you fall behind.”

You may be able to negotiate a lower interest rate or work out a deferment arrangement where you can skip making payments for a period of time, but they will be added to the end of your loan term and you’ll ultimately have a longer loan and pay more interest over time.

Buchko said speaking with your current lender works because the lender that you’re working with already has a vested interest in keeping you as a customer. However, he added, “a lot of it is up to the lender and how flexible they are willing to be to the customer.”

If your loan is still with the dealership, you may be out of luck if you want to negotiate better terms.

“Generally speaking, the dealer is probably not going to be interested in dealing with you,” said Jack Gillis, director of public affairs at the Consumer Federation of America and author of “The Car Book.”

If some time has passed since you made the purchase, the dealer probably doesn’t hold the loan anymore, Gillis pointed out. Your loan has probably been transferred to another company, anyway. You could call that company and ask for a refinance, and they may or may not respond with another offer.

Option #3: Cut back on other spending in your budget

An oldie but goodie. It’s always a good idea to refine your budget if you’re having a tough time covering your bills. If your car payment is difficult to manage, and you aren’t able to refinance your loan for a lower monthly payment, you should take a look at your budget to see if there you can find a way to get the car loan under control.

First, calculate your monthly income. That’s what you’re working with each month. Next, subtract your fixed expenses. Those are fairly non-negotiable items in your budget that aren’t likely to shift much like your rent or mortgage payment, auto loan payment, food, and any insurance you’re responsible for paying.

According to the 50/20/30 budgeting rule of thumb, your fixed expenses should comprise no more than 50 percent of your total income. If they are higher, see where you can save money. You could dial back spending on food, for example, by cooking more of your meals at home or switching grocery stores.

Next, your savings. Subtract what you intend to save for the month. Under the 50/20/30 rule, about 20 percent of your income that goes toward saving for things like retirement and vacations, or funding an emergency fund.

What you’re left with is money you can use on flexible expenses like dining out and entertainment. It should be about 30 percent of your income if you’re able to follow the 50/20/30 rule. Your flexible expenses should be where you should look to make the most adjustments because you may have more room to cut back. You may find extra money by cutting back on how much money you spend on coffee each week, or reducing the number of shopping trips you take each month.

Option #4: Sell your vehicle

Selling your car can be a tough decision to make for a myriad of reasons. Your vehicle may hold sentimental value to you, for instance, or it may be the only method of transportation for you and your family.

“Unfortunately, most people don’t want [sell the vehicle] but it’s better than getting the car repossessed,” said Giorgianni.

If your current financing deal is too much for you to handle, or if you realize keeping the car will eventually lead you to holding an upside-down loan, selling it may be your best option.

“If you are in trouble, then your only option really is to sell the vehicle and keep your fingers crossed that you are not upside-down so that you can use the proceeds from the sale to pay off the vehicle,” said Gillis.

If you plan to sell, sell as soon as you can. The longer you own your vehicle, the longer it has to depreciate (lose monetary value).

“If the car is fairly new, there is still value in the car,” said Buchko. If the vehicle still holds some value, and it’s more than what you owe, you can try to trade it in and use whatever value it still holds to purchase a new car, under more favorable financing terms for your

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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