How to Shop for a Car Loan
On February 25, 2026 By newsroom Topic: Automotive
Finding the right car loan can save you thousands of dollars over the life of your loan. Here are 9 expert tips to help you secure the best interest rates and terms for your new or used car.
1. Check Your Credit Report and Score
- A higher credit score leads to lower interest rates.
- Review your credit report for errors or discrepancies.
- Get free reports at AnnualCreditReport.com.
- Many banks and credit card companies offer free credit scores.
2. Improve Your Credit Score Before Shopping
- Correct any mistakes on your credit report; most disputes are resolved within 30 days.
- Pay down existing debts and avoid late payments to give your score a quick boost.
3. Set a Budget—and Stick to It
- Determine what you can afford, considering your needs now and in the future.
- Avoid upselling tactics that push you into a bigger or more luxurious car than necessary.
4. Look Beyond Monthly Payments
- Dealers may focus on monthly costs, but low payments can mean longer loan terms, increasing overall interest paid.
- Aim for a shorter loan term to avoid being "upside down" (owing more than the car is worth).
5. Make a Larger Down Payment
- Experts recommend a 15-25% down payment to reduce your loan amount and interest costs.
- Larger upfront payments shorten loan terms and save money in the long run.
6. Get Preapproved for a Loan
- Contact your bank or credit union for preapproval before visiting a dealership.
- Preapproval strengthens your negotiating position and provides a baseline to compare dealer financing.
7. Shop Around for Subprime Borrowers
- If your credit is poor, check automakers’ financing deals on entry-level models.
- Credit unions and banks often offer better rates than dealer-based financing for subprime borrowers.
8. Consider Buying a Used Car
- Used cars often cost less upfront, reducing loan amounts.
- Watch for higher interest rates on used-car loans, especially at “buy here, pay here” dealerships.
- Research the vehicle’s history and have it inspected before buying.
9. Be Aware of Loan Discrimination
- Studies show Black and Hispanic borrowers may face higher interest rates.
- Report suspected discrimination to the Consumer Financial Protection Bureau or the Federal Trade Commission.
Pro Tips to Save More
- Negotiate Loan Terms: Use preapproval to power better terms from dealers.
- Avoid Long-Term Loans: These increase overall costs and risk being underwater.
- Check for Rebates: Some utilities or organizations offer rebates for specific car models or eco-friendly choices.
