6 Tips for Getting Your Best Loan on a New Car
By: Brian O'Connell

NEW YORK (sbup) — It's rarely been a better time to buy a new car, considering the low loan rates out there, and some 17 million new vehicles are expected to be driven off the lot this year.

What can consumers do to get in on this and come out winners?

Todd Nelson, business development officer at LightStream, the online lending division of SunTrust Bank, says buyers must do their homework before seeking a loan. "Look at sites like Kelley Blue Book to research pricing and other information about the vehicles you're interested in buying," he says.

Once you've secured a loan, wait until the money hits your bank account to begin negotiating a vehicle purchase with a dealer. "You want to negotiate as a cash buyer," Nelson says. "This may provide car buyers with additional leverage at the dealership. And since they're paying cash, they may be in a better position to play hardball with the car's price."

Consumers should focus their search for a loan on car manufacturers rather than banks, WalletHub advises in its Auto Financing Report, because automaker loan interest rates are 35% below average, while national or even regional banks have rates up to 40% above average. (Also better than big banks: Credit unions, where rates are 25% below average, according to the report.)

If you do go to your bank for a loan, Delafield, Wis.-based American Deposit Management founder Kelly Brown says, start chiseling away on rate breaks. "Leverage your current relationship with your bank to get a lower rate," Brown says. "Often banks will offer a discount for loans up to 0.25% if the banks holds their primary checking account. There can also be discounts if auto-pay feature is used."

Also, ask your lender if it has an exclusive car-buying program, as many banks and lenders do. "Consumers can also use the car-buying services now offered by many financial institutions," she says. "This service provides a discount on the rate of the loan when the car is purchased through dealers that have a relationship with the financial institution."

WalletHub says good credit will help, too, as new-vehicle buyers will pay four-and-a-half times more to finance a car with fair credit versus excellent credit, or $5,500 in extra interest paid over the life of a $20,000 five-year loan.

That may matter less in 2015 than in years past, since WalletHub's 17 million new-vehicle prediction is not just because new-car loan interest is 17% less than the average used-car loan.

It's also just because experts in the report say Americans feel the time is right to buy.

"I would say 9 or 10 on [a one-to-10] scale since we are looking at an improving economy in the USA but challenges abroad," says Frank L. DuBois, chairman of the Kogod School of Business at American University, in the WalletHub report. "Consumers that have delayed purchases are now getting forced into looking for cars as maintenance and repair costs on older cars rise."

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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