Most car buyers find it more convenient to apply for financing directly from the dealership, although it may be more practical to shop around for other loan types.
If you are looking for the best auto loan rate in Utah, Wasatch Peaks Credit Union notes that it’s important to think about other financing options. An MIT Sloan School of Management and Brigham Young University study suggested that there is a higher chance of getting the best rates when you shop around for car loans.
Best Interest Rates
The study based its findings from more than 4 million car loans issued by over 326 financial institutions in the US. It showed that borrowers would only need at least quotations to compare which would be the best rate for them.
Those who closed a deal with the lowest interest rates comprised less than 20% of the sample population. This could be because fewer people spent the time to research on other alternative financing options.
Aggressive salespeople from dealerships may also be another factor, as many would convince you to sign a deal even if your income is not enough to pay off a higher-priced vehicle.
Avoiding Financial Traps
Some dealerships have advertised a credit guarantee of up to $30,000 for those who earn at least $350 every week, or $18,200 per year. It may be a good option, but take note of the negative implications over the long term.
That’s because a person would be bound to pay $566 every month to settle their debt, given that the financing deal involves a five-year term and a 5% annual percentage rate. This payment scheme represents around 40% of the person’s monthly income.
Take your time when choosing the right car loan. The money you save from lower interest rates will be worth the effort from choosing among different lenders.