Buying a new car—or a new-to-you used car—is an exciting time in anyone’s life, but there’s no getting around the fact that it can be a significant financial commitment. The average price of a new car in 2023 is over $48,000. Even considering that a new car will lose around 40 percent of its original MSRP value over the first five years of its lifetime, that’s still nearly $29,000. Do you have $29,000 lying around to drop on a purchase? If you’re like most Americans, you don’t, which is why one of the first key steps for buying a car, used or new, is securing financing.
However, there is a lot to consider when comparing auto loan offers, and making a suboptimal decision can wind up costing you. In this blog post, we’ll walk you through how to compare Wisconsin auto loan rates and highlight common mistakes to avoid.
Dos and Don’ts in Comparing Wisconsin Auto Loan Rates and Offers
Do: Consider the Monthly Payments
When people look at financing for their car purchases, one of the key factors that they should consider is monthly payments, which tend to be a direct indicator of how affordable a purchase is. If the monthly loan payment doesn’t fit comfortably into your budget, then that particular loan option might not work for you. You don’t want to purchase a vehicle you ultimately can’t afford the payments for only to have it repossessed.
Don’t: Neglect Your Credit Score
Your credit score is an overall measure of how creditworthy you are—in the opinion of lending experts—when it comes to paying back what you’ve been lent. For that reason, your credit score can play a crucial role in the rates you’ll be offered on an auto loan. With a high credit score, you might be able to get better offers, while a lower credit score could saddle you with higher rates. Check your credit report for free, and if your score is lower than you’d like, consider trying to improve it before applying for a loan.
Do: Ask About Relationship Discounts
If you’ve been a long-term customer at a bank or credit union, they might be able to offer you better deals on things like car or home loans than you’d be able to get as a new customer. When you have an active checking account at Capital Credit Union. for instance, you may qualify for a 0.50 percent loan discount on an auto loan.
Not all lending institutions offer these—and those that do might have strict qualifications—so you shouldn’t count on a relationship discount, but you shouldn’t forget that they could exist either. It never hurts to ask.
Don’t: Overlook Additional Fees and Charges
“Always read the fine print” is good life advice, whether you’re comparing Wisconsin auto loan rates or anything else. Things like origination fees, prepayment penalties, and late payment fees can be nasty surprises when it comes to repaying an auto loan that you were sure was within your budget—until it turned out not to be. Make sure you carefully review the terms and conditions of each loan offer so that you understand all associated fees.
Do: Consider More Than Just the Wisconsin Auto Loan Rates
Don’t focus solely on the auto loan interest rates. In general, think of your auto loan as comprising the following parts:
- Principal: the total amount of money borrowed
- Loan term: the number of months you will be repaying your loan (Some of the most common loan terms in the US are 36, 48, or 60 months, but this is negotiable.)
- Down payment = the amount of cash you are putting into the purchase to start (Think of this as an initial, typically larger, loan payment.)
- Interest rate = the percentage you will pay the lender for lending you the money (This will determine how much money you will pay, over a loan’s life cycle, beyond the principal.
While the interest rate is the most obvious indicator of how much your auto loan will cost you, it isn’t the only factor involved. Both the loan term and the amount of your down payment will impact the total price you pay over the life of the loan.
The length of the term matters because you will be charged interest each month that a balance remains on your loan. When the balance exists longer, interest accumulates longer, costing you more over time. Put simply, you will pay more overall interest over a 60-month term than a 36-month term, maybe even thousands of dollars more.
The amount of your down payment affects your loan offer a little differently. A larger down payment signals to lenders that you’re more invested in the purchase and thus more likely to repay your loan. This makes you more trustworthy in their eyes. With a bigger down payment, financial institutions will be more likely to offer you a lower interest rate and a better deal on your auto loan. So it’s worth considering a higher down payment if you can afford it.
Don’t: Rush the Decision
Buying a car can feel exciting, and the urge to drive off the lot in a shiny new vehicle might lead you to dive in head-first. Resist that urge! Take your time to thoroughly compare auto loan offers, and don’t feel pressured to make a quick choice. After all, the right loan can save you money in the long run.
Do: Shop Around for the Best Lender
Different lenders might offer varying interest rates, down payment requirements, and other terms and conditions. Don’t settle for the first offer you receive, whether it’s dealership financing or from a local lending institution. Explore multiple lenders and see what Wisconsin auto loan rates they might offer.
If you’re looking for the best auto loan rates in northeast Wisconsin, consider Capital Credit Union. Beyond great rates, you’ll have access to Capital CarFinder, Guaranteed Asset Protection (GAP), mechanical breakdown protection, and more. We’re confident we can come up with a great deal to get you in an awesome ride today.