Getting a low rate auto loan

Considering the high cost of living these days, many people are struggling to afford everyday expenses, let alone additional, one-off purchases. Buying a new or used vehicle, however, may be deemed a necessary expense regardless of the economic landscape, but not everybody can afford to pay for a new car without some kind of financing deal. Unfortunately, financing means credit - and credit means debt. Provided below are five top tips for achieving a low rate on vehicle financing.

1. Compare all offers and rates

Car dealers are notoriously difficult to deal with when it comes to haggling, bartering and striking a fair deal, but negotiating costs with salesmen is a more or less futile endeavour if the prospective buyer has not compared the market for the very best loans.

As with new and used car dealers, there are plenty of loan providers in existence. Prospective buyers should not settle on the financing option preferred by the dealer unless it is absolutely essential or actually a good deal, which is unlikely. Providers of unsecured personal loans should be compared before looking at vehicles. Buyers should know how much they can afford to spend after applying for the loan that best suits their financial requirements; furthermore, by securing a loan before purchasing a vehicle, prospective buyers are able to offer cash upfront - a bonus that will not escape the attention of car dealers.

2. Increase size of deposit or down payment

Providers of vehicle insurance and financing options set terms of one year, two years, three years or more depending on the specific nature of deals struck with buyers. Sometimes, the rate offered by loan providers is a little too high for consumers. In order to obtain the most cost-effective deals, it may be prudent for vehicle buyers to pay a handsome deposit or down payment. Paying more money upfront - if at all possible - seeks to lower the repayment term or rate, making a new vehicle affordable over time.

3. Consider pre-registered vehicles

In order to meet sales targets, large dealers often elect to purchase new vehicles in bulk. Dealers are required to pre-register these vehicles, meaning that they become the first official owner. Everybody knows that brand new vehicles are worth more than second-hand cars, but few realise that pre-registered cars are simply brand new vehicles that happen to have had a first owner (the dealer). Buying pre-registered vehicles can reduce the cost of a new vehicle purchase by £4,000 or more in some cases, meaning smaller loans with lower APRs can be considered.

4. Read the small print

Loan agreements must be read in detail before they are accepted - a cardinal rule of financing that is invariably overlooked by those eager to secure new funds. The small print contains provisions of great interest, however, which is why it should never be skipped or not properly understood prior to acceptance. One of the most important terms or conditions to look out for in a loan agreement pertains to early settlement penalties, which may not be explicitly described as penalties. In short, it is necessary to find any term that states an additional charge for early repayment. Many loan providers do not insist on such terms, so consumers ought to have the freedom to repay their debts early.

5. Use a credit card

Finally, using a credit card instead of a loan can provide certain advantages. The Tesco credit card and other such cards often include hidden benefits for new vehicle purchasers, while it may be cheaper to buy a vehicle outright and spread the cost on a credit card than choose a loan or financing deal. New credit cards with interest-free periods are especially useful in this context.