Shopping for a decent interest rate can seem simple but 

what about…read on

Interest rates are printed in plain sight with smiley faces and adjectives like “wow” or “supreme” or the best known “Preferred”.  Sometimes dealers use those explanations when you ask for the rate. A major reason for dealers to be vague is that dealers do not know what your rate will be until they get your credit score.  Sometimes it takes more than one score. It can take two sources to lock in a  guaranteed rate.

There are other conditions that affect rate as well.  Your bank may require a certain percentage down to qualify or the preferred rate might be limited to shorter loan terms like 3 or 4 years.  You save a little on the rate but your monthly payment is higher because you must pay your loan sooner.  It can be confusing and in fact, I think that is done on purpose. 

Remember that if you get your loan through the dealer he gets a kick back called reserve from the bank.  In many cases, the higher the rate a dealer charges you, the more reserve they may earn.  Whether the dealer gets a reserve or not, isn’t what’s important.  What matters is simple, the terms of the loan

If the dealer has the lowest rate for the length of time you need then the dealer reserve doesn’t hurt you.  Shop the rate at you bank or credit union but ask the important questions.  What is the best rate, How many months are available at that rate, what credit score is required, is down payment a requirement and how much?  If the credit score isn’t within the requirement, what are the rates and other terms in that case?  

If you are purchasing a $15000.00 vehicle and you put the sales tax down, it may not matter that your credit union has 5 percent, if they lend for only 36 months.  Your payment will be $450.00 a month.  If the dealer has 7 percent but can arrange a loan for 60 months, your payment is 297 a month. That’s a $150.00 a month difference.

If you are preparing to buy a new vehicle, do these few things.  Call your bank or credit union. Find out what rates are available at what length of time.   Ask what credit score is required and what the terms would be if the credit sore isn’t as good. Also find out what kind of down payment is required.  When you have picked out your new vehicle ask the dealer for the same information about the terms and qualifications required for loans.  Now figure out which one looks like the best for your budget. You can get a small loan program off the net or from iTunes.  The small computer program will help you figure out where your monthly payments will be and where you want them to be.

One advantage that may come up is if you get your loan from your own source, many of the manufacturer’s incentivized rates have a rebate alternative.   When you get your own money you get another big chunk off the vehicle, sometimes.

Check it out …The proactive buyer