OnPath Credit Union

Yes – you may be able to negotiate a lower auto loan interest rate with some lenders. Lenders base approved rates on traditional loan approval criteria like a borrower’s credit score and the size of their down payment. However, there isn’t a uniform rubric for rate decisions, and there are a handful of techniques car purchasers can employ to secure a lower rate.

Shop Around

One of the most powerful tools at the disposal of virtually every borrower and car shopper is the ability to look elsewhere for financing. Dealerships might offer special discounts on your car, truck or SUV purchase if you finance through them – but you aren’t required to do so. Compare rates with your bank, local credit unions and other lenders to learn about other rates you may qualify for. Then go back to the dealer (or whichever lender you’d prefer to use) with proof of lower rates and better terms you were offered elsewhere. In some cases, they may adjust to match competing rate offers.

Cosigners

While not a negotiating tactic in the traditional sense, having a cosigner reduces the risk of default for lenders because you won’t be the only person on the hook if you default on your auto loan. Rates are fundamentally based on perceived risk, and anything you do that reduces the risk of lending you money will likely result in a better rate. This method is particularly useful if your cosigner has good credit or at least better credit than yours.

Put More Money Down

Down payments are arguably more important than credit score when it comes to your monthly loan payments and rate.

Monthly Interest accrual is a percentage of the principal amount. By drastically reducing the principal, you’re cutting a significant amount of interest off the total loan amount.

Defaulting on a large loan will be more damaging to the lender, meaning small loan amounts are less risky and are usually eligible for lower interest rates. Borrowers are also more likely to pay on time and in full each month when their payments are lower and more manageable.

Simply put, larger down payments reduce loan risk for lenders, often leading to lower rates.

Improve Your Credit Score

The long game to reduce rates is taking steps to improve their credit score. This is one of the most sustainable and financially responsible ways to qualify for a lower rate on your auto loans as well as all other loans.

You can read our past blog for tips to boost your credit score as well as our blog on debt consolidation and how it may help you get your debt under control. Our members also have access to exceptional financial and credit counseling resources, which may help borrowers make positive changes to achieve sustainable credit score improvements. 

Auto Loan Refinancing

If you have two or three years left on your auto loan and you know your credit score has improved since you first bought your vehicle, auto loan refinancing is likely a smart idea. Chances are you will qualify for a lower interest rate or more favorable terms since the current principal will be lower and your perceived credit risk has decreased. The auto loan professionals at OnPath Federal Credit Union would be happy to discuss auto loan refinancing opportunities with you.

Negotiate the Price of the Vehicle

One of the most straightforward and obvious ways to reduce the loan's total cost is to negotiate the price of the vehicle itself. If you can bring down the purchase price, your loan amount will be less, saving you money in interest over time. This may also mean the downpayment you can afford will cover a larger percentage of the purchase price, reducing the lender’s risk and your rate.

Get a Shorter Term

While longer loan terms mean lower monthly payments, they also typically mean higher overall costs due to extra months or years of interest. If you can afford it, consider a shorter loan term.

Don’t Ignore the Small Print

Before signing anything, read all the documents carefully. Look for any hidden fees or clauses that could affect your loan. If you don't understand something, ask for clarification.

Avoid Unneeded Addons

Dealerships may try to add additional products or services like extended warranties, clear coats or insurance products. Be clear about what you need and don't let unnecessary extras inflate the cost.

Be Warry of Dealership Financing

Dealers often mark up the interest rate they offer you so they make a profit on the financing you get through them. They often attempt to hook buyers by offering vehicle price discounts if you agree to their rate-inflated auto loans. If possible, secure financing from your bank or credit union before you go to the dealership.

Are You a New Orleans’ Car Shopper Looking for the Best Auto Loan Rates?

OnPath Federal Credit Union offers competitive auto loan rates and terms to members. If you’re in the market for a new vehicle but don’t want to overpay for dealer financing, get in touch with our personal loan team by calling 800.749.6193.