How to Get a Car Loan

Purchasing a vehicle can be an exciting experience—and also a pain in the wazoo if you haven't done your homework. Below you'll find information on how to obtain an auto loan without getting taken to the cleaners.

Know Your Credit Score

The number one factor in determining the rate you'll get on a car loan is your credit score. The higher your score, the lower your rate. It's that simple.

For those who don't know, your credit score is based on information obtained from your credit reports, and these reports can vary.

Here's a very basic breakdown of credit scores and their meanings

Excellent credit: 740 and higher
Good credit: 670 to 739
Fair credit: 580 to 669
Subprime credit: 300 to 600

Poor credit: 580 and under
For more information, please refer to our page about credit scores.

Shop Around

Once you have determined how much you want to spend on your car, it is time to start looking for a lender. Typically, car loans are offered through:

Banks.
Credit unions.
Dealerships.
Other financial institutions.

When applying for an auto loan be prepared to provide the lender with your:

Name and address.
Date of birth.
Social Security number.
Current job information.
- Copies of recent paycheck stubs may be required.

Get Pre-Approved

Being pre-approved for a loan before you walk into a dealership is like knowing the answers before you take a test. It gives you the confidence needed to secure a good deal. A good place to start looking to get pre-approved is at your local credit union or bank.

Another option for pre-approval is to use the services of an online provider. Services like this allow banks to compete head-to-head for your business, ensuring you get the best deal possible.

Keep in mind that you don't need excellent credit to get pre-approved, but you may pay a higher interest rate depending on your credit score. For more information about getting a loan with questionable credit, please refer to our Bad Credit Auto Loan page.

Choose the Right Vehicle

Choosing the right vehicle is just as important as securing a good deal. There are many factors to consider when it comes to selecting the right vehicle, and we're not just talking booming system and a fancy paint job.

Some important considerations include:

Vehicle economy—MPG, Hybrid or Electric?
Maintenance reputation—Does the company have a history of expensive repairs?
Vehicle size—Does your vehicle match your needs?
Insurance rates—How much will your rate increase or decrease with a particular vehicle?

Close Your Deal

Once you have settled on a vehicle and negotiated a fair price, now's the time to close the deal.

If you're working with a dealer, this is the time when the dealer may or may not try to upsell you on certain add-ons, such as an extended warranty, security system or even window tinting. In many circumstances these products or services can be obtained elsewhere at a much better value, so it's important to do your research and go in fully prepared.