Tips For Choosing The Best Car Loan
Before deciding to purchase a 0 down payment car loan, it is critical to understand your financial situation. If you have a below average credit rating and need a car loan with a good APR, the first step is to check your credit report to be sure you qualify for a car loan. If your credit is less than perfect, you can still obtain financing although your interest rate may be higher than someone with perfect credit. It may be harder to get financing with poor credit if you do not have a down payment.
Valley Auto Loans uses lenders who specialize in auto loans for people with subprime credit scores.
These lenders look closer at the applicant’s ability to pay back the loan with a steady job and not rely on the credit score for the determining factor.
Many dealers and lenders are using a new credit score report that will have a different credit score than the one you see.
We do recommend, correcting any problems on your credit report before going shopping for a new vehicle is strongly advised. You will also need to provide proof of income and address to the lender when you apply for the loan, so be sure to have that information available and take the right steps to reconstruct your credit score.
Sell Your Old Car
If you have an old car that you are considering trading in to purchase a new one, it is often better financially if you sell the car yourself, especially if the car is in excellent condition with low mileage. However, if your car has mechanical problems or is in poor condition, it may be difficult to sell. In that case, it is better to trade in your current vehicle at the dealer to lower your down payment when financing.
Keep in mind that no matter what condition the vehicle is in, the dealer will offer less than the trade-in value. You will need to factor that in when determining how much you will have for a down payment if part of that down payment is the trade-in.
Lower Monthly Costs
You should try to give a decent down payment to lower your monthly payments. However, what many consumers do not know is that a lender can do some things to get the monthly payment where you need it to be to fit your budget, so you do not have to write a down payment check.
If your credit rating is high enough, they can lower the interest rate, or they can offer a longer term of the loan, allowing you to pay for six years rather than five, for example.
Therefore, other options are available if you do not have a large down payment or would prefer not putting a large sum down on a vehicle initially. This can also be offered if you are simply refinancing your car for lower payments. Use our loan payment calculator to help find the best monthly payments and what size down payment is best for you.
During certain times of the year, many auto manufacturers and dealers offer cash rebates on specific vehicle models to boost sales. A cash rebate is a good way to put a down payment on a car without having to take money out of your pocket.
Some dealers even offer discounts on new car leases as well, but they do not serve as cash on signing or a down payment. In those cases, the money often goes to the dealer who then applies the rebate as a lower down payment or a lower monthly payment on the lease.
- Some dealers will not tell you about the rebates but use them in the negotiating price that you may find out later at the signing so ask about them during price negotiating.
- Also, check to see if the car you are considering is eligible for tax credits for alternative fuel or electric vehicles.
- The tax incentives could easily pay back the money you use for your down payment, so it is like not having to lose the cash down payment you came up with.
Financial Company Benefits
Financial companies prefer down payments as it provides them with cash at the beginning of the loan so that if the buyer defaults, they still have money collected.
A down payment also offsets the instant depreciation on a new car so that if there is an accident or if the buyer defaults, the finance company does not suffer as great a loss. No money down car loans cost more.
This is why many lenders offer lower interest rates to subprime credit buyers who provide higher down payments as it indicates a customer who is more likely to make payments regularly and on time than one who does not.