I am in the market to buy a used car. I got approved for an $8,000 loan with an interest rate of 8.99%. My credit score is 659 which is not good or bad.
Is this a good interest rate or do you think I could find a better one somewhere else? Do car dealerships normally offer higher, lower, or the same interest rates compared with banks or credit unions when they finance a car to you?
Auto finance is what I do for a living and with a score of 659 8.99% is actually a very good rate for a used car loan.
Vehicle loans are based on 10 different things all of which can affect your rate.
If you think this rate is to high contact your own local bank or credit union and see if they can beat it.
As far as dealers are concerned they always unless your approved through a credit union mark up the rate they are quoted to make additional profit.
In this economy it is a very good rate.
I would suggest you pay it off early and you will get a dropped or reduced payment at the end of the term..
I think it’s high. My credit union has rates starting at 5.10%, according to their website. At that rate, your first payment will have $34 of interest in it. The dealer’s rate will have $59.99 interest – $26 difference.
Car dealers will often offer high interest rates, because they may get a kickback or a cut from the lender. Financing from the dealer is convenient, but you sure pay for that convenience.
Call a local credit union, or talk to your bank. You can do better.
Oh, one other rule of thumb: If you can’t pay for a new car in 3-4 years, you can’t afford it. There’s too much risk of getting upside down in the payments – that is, you will owe more than the car is worth. With a used car, I’d cut that time frame back to 2 years, maybe 3 at the most. But do some digging and find out how much the car will depreciate over the next 3 years, and compare that to the balance of the loan over the same time frame. If you get stuck, and have to sell the car to get out from under the loan, you want to have some cushion so you can do so.
I’ve seen worse. Are you putting any money down? That can sometimes matter.
The problem isn’t whether a bank is cheaper, it’s finding a bank that will do a loan on used cars at all. Check out what they do wherever you bank. They may know of another bank that will do used car loans under the right conditions.
If you like the car I wouldn’t worry if you can’t get a better rate.
$8,000*8.99% = $719.20 interest/year or $59.93/mo.
$8,000*6.99% = $559.20 interest/year or $46.60/mo.
Notice that there is only a $13.33/mo difference in the 2 rates.
Happy driving.
2 years ago my mother financed a passat and her credit score was in the 720’s i believe, and the rate on te passat is about 7%. Like everyone said, in this economy, it’s not bad. But def try a credit union.
And do your research on the car, and it’s value. esp for the future. and don’t buy a volkswagon!
Normally, the car dealer offers you better interest rate. Considering the current market situation, you should get a better rate.
Also check http://www.cashorcredit24.com for loan/insurance related information.