Most Americans believe that car ownership is mandatory. It ensures a comfortable lifestyle; lets you hold onto your job and assures freedom from public vehicles. The New Jersey Motor Vehicle Commission requires you to title and register the vehicle in NJ by sending a few information and documents like evidence of ownership and mileage statement by mail. It is a simple online process which smoothens the buying journey. But negotiating the right car prices and then getting an affordable loan can make it a great deal altogether.
Auto loan interest rates in the US were just below 4% towards the end of January 2022 and the average of new car financing was about $35,200 at the end of the fourth quarter of 2020. A credit union offers pre-approved funds with low rates for new vehicles. The lenders let you set up auto-pay for payments too. There could be flexible terms of up to 72 months with up to 100% financing available for the full purchase price. But how to get the best rates to take home your new ride? Here’s a look.
Have A Good Credit Score
Having a ‘prime’ credit score is a good way to get favorable interest rates. So, aim for a score in the range of good to excellent, which is 670 and above. This makes you a great candidate for the loan and you might not have to pay more. In short, the higher the score, the lower the rates. So, try to improve your credit history before applying by clearing big debts, asking for a higher credit limit and avoiding unnecessary credit applications.
The lender might also pay special attention to FICO Auto Scores. It helps them determine how risky you are as a borrower. The figure typically ranges between 300-850 points. 700 or higher can be a good score.
Bargain the Car Price
US citizens are dealing with $1.18 trillion in auto loans in 2022. This takes up 9.5% of the overall consumer debt. So, one of the best ways to reduce the principal amount is to negotiate the car price. A minimized borrowing would mean shorter loan tenure which ultimately helps score affordable interest rates. Another good way is to pay the maximum down payment upfront from your pocket. This can reduce the outstanding balance and help you take a lower loan amount. The main goal is to make you appear as a safe borrower before the lender.
Short Loan Tenure
Having a debt running for too long is not a feasible idea. It builds up interest. The aim should be to pay off the auto loan within the shortest time possible. Pick a tenure in the range of 3-5 years. You might have to pay slightly higher EMIs. But a short-term loan brings down the overall interest outgo. This is because the lender takes reduced risks since the interest is to be paid within a short span. In fact, it also indirectly reduces the total cost of buying a car. Additionally, you can enjoy quick approvals. Plan your repayment well to ensure a better scope at building an impressive credit score.
Regardless of the expenses, it is a good option to opt for a car loan. No wonder the global car finance market size stood at $1,290.7 billion in 2019 and is projected to reach $2,334.3 billion by 2027 growing at a CAGR of 14.3% from 2020. Getting a new vehicle can seem like a huge expanse. But following these simple tips can help in securing the best loan deals. Consider working with a credit union that offers rate reduction on opening additional accounts. Do not forget to read the documents thoroughly. It helps you understand what you are getting into before signing up for the loan.