With the cost to own a new vehicle rising, it’s more important than ever to consider what you’ll pay for a car loan and to shop for the best interest rate.
The average new car loan interest rate reached 5.5 percent in 2018, up about one percentage point from the previous year, according to Ben Bartosch, J.D. Power’s manager of forecast analytics. Meanwhile, a new car purchase price is $33,000, on average, he says. That means a buyer will pay thousands of dollars in interest on a 60-month loan.
Indeed, many car owners report feeling stressed by their debt. A recent Harris Poll survey of 2,000 Americans for Fair, which provides cars each month for a flat fee, found that 47 percent of people who’ve had auto loan debt say it’s taken away some of their peace of mind.
With the shift in the loan market, anyone looking to buy a car or refinance a loan needs smart strategies. Here are five things financial and automotive experts say will help you lock in financing that fits your budget.
1. CHECK YOUR CREDIT
If you don’t know your credit score, you don’t know what interest rate you could qualify for. Additionally, if you find a problem on your credit report, you can fix it before entering the car-buying process. And, if you already have a loan, you may be able to refinance into a lower rate and payment if your credit is stronger than when you started the loan.