People enter into the car buying process with little information on the cost of borrowing money to purchase a new or used car
. The cost of an auto loan or specifically the interest rate is directly related to your credit rating or credit score. The credit score will give you an indication of an estimated interest rate you can expect to pay to purchase a new or used car.
Auto Lenders use a credit score system to determine your credit worthiness and ultimately your auto finance percent. Terms such as Super Prime, Prime, Non Prime, Sub Prime and Deep Sub Prime are used with correlating credit score ranges. The tiers of Super Prime and Prime will allow a car buyer the best auto financing rates with a few points over prime rate.
Prime and Non prime will allow a consumer average financing rates with single digit points above prime rates. The final tiers of Sub Prime and Deep Sub Prime have a large range of rate offering with some ten plus points above prime rate. The key to understanding Auto Loan interest rates it to determine your FICO score and figure out the tier you are in. From there, you can search the internet for the best auto loan interest rates and evaluate your rate from that point.
If today's rates are 6.25% and you are in the Prime tier then you should get that percent. However, if you are in the Non Prime Category, adding a few points or estimate at 8% to 9% is where you should fall. Sub Prime buyers will have to add a few points on the Non Prime rate and Deep Sub Prime a many more if you can find an auto finance company at all.
Increasing your credit score if your can move up a level is a smart move to decrease your auto costs. Search auto loan rates on the internet to be informed on current rates and what you can expect when applying. Car shopping means finding the best auto loan at the best rate.
It is best to know where you should fall before visiting an car dealer. If you do not do the work, you will pay the price in a higher rate. Do your research and check out Auto Classifieds sites for your next car that fits your needs.
