Getting the Best Deal on Your Auto Loan

by Jim Thompson | Last Updated: January 11, 2021

Some consumers fail to realize that the most important aspect of a car deal is not the price but the loan. What good is negotiating for a lower price if the lender-friendly financing has you paying back those initial savings and more?

Lending money is a for-profit business and, as with any business, the more profitable, the better. Lenders do not assist you in buying your car as a kind-hearted public service. It is important to remember that there are many options when financing a car. If you thought that the only place to buy pants was at Neiman Marcus, you probably would spend much of your time walking around in your underwear. So too it is with auto lenders. Many of them would be more than satisfied to see you walking around in your underwear while your pants budget goes straight into their pockets. Do your homework, weigh your options and educate yourself so that you can get the best deal available.

First, some quick terminology


Simply put, this is the amount of interest that you will be charged on the loan. Don’t be immediately taken in by a low-interest rate, not even zero percent. A zero percent loan will likely cost you more now and can cost you a lot later if you fail to keep up with the terms of the agreement.

The interest rate should not be the only factor in your decision. Other considerations include the length of the term. Even if you pay a lower interest rate, making more payments will have you paying more for the car in the end. You should also look for hidden charges in the agreement like the loan maintenance fee charged by some lenders.

Length of Repayment Period

Loan repayment periods can be structured to last between 24 and, in some cases, 70 months. The decision as to which term to choose relies on your financial needs and goals. If you want to get the car paid off quickly, select a shorter term and prepare yourself for higher monthly payments. On the other hand, you may need to keep your payments low so that they fit more conveniently into your budget. It must be understood that if this is your option, you are likely to pay more for your car in the long run as you will ultimately pay more interest for the privilege of low payments.

Leasing vs Buying

For some, leasing a car is preferable to buying. If you wish to keep payments low and enjoy always driving a newer car, leasing may be the right choice for you. However, if your goal is to ultimately own the car outright, you will pay more by beginning with a lease.

Auto Refinancing

It may be after all the trouble involved in shopping for a car and the loan to pay for it that you decide you are satisfied with the car that you currently own. If you like your car but not your current loan then refinancing may be an option to consider . Refinancing may allow you to either pay off your car faster or to finance the remainder of what you owe at a more attractive rate.