Low Interest Rate Car Loan
When the interest rate is lower, you pay less. That is the general rule. This is what makes a low interest rate car loan so attractive. Why are they offered and is there a downside?
There are several reasons why a car dealer offers a low interest rate car loan to his good credit customers. The most important reason is they not only want to sell cars, but many times have to sell them. There is not doubt that a low interest rate can be a spur to increased sales. When a dealer needs to clear last year’s models off the lot to make room for the new ones, a low interest rate loan offer is better than the drastic price reductions that will surely be the next step.
There is no question that the low interest rate benefits the buyer. Some dealers even offer 0% APR deals. This is the same as saying no interest at all. It is easy to see that this would not only eliminate interest but would mean a smaller more affordable monthly payment. In fact, this is a secondary reason for the offers. Many buyers will move to a higher priced car. The reasoning is that if they can afford a certain monthly payment, the 0% APR will allow them to buy a more expensive model and still pay the same amount each month.
Do not go into your car dealer ready to cash in on a low interest rate car loan if you do not have good credit. This is an essential part of the deal. People with poor credit ratings must pay a higher interest rate to afford the lender protection against possible default of the loan. The low interest rates can be risked on only people with a near perfect credit history as the lender is not covering default cost at all.
There is only one time that a 0% APR might not be the best deal. This is when there is an option between a cash rebate and the lower interest rate. Depending on the size of the rebate, it might be a bit more profitable to take it and secure a regular car loan from a lender at the best possible rate. If the rebate money was invested, the potential savings from selecting the rebate over the lower interest would be even more. The way to solve this question is to simply do the math. Just calculate the interest saving over the life of the loan and compare it with the size of the rebate.
There are many things to consider when shopping for a new car. Every thing from model to color to price must be decided on before a buying decision is made. Low interest rates are used to encourage you to buy and they should not be overlooked in the buying decision. Most people have worked hard and made sacrifices to establish and maintain good credit scores and low interest rate car loans are one of your rewards. Do not hesitate to claim it.