Car Loan Interest Rate
Did you know that there are more factors that affect a car loan interest rate other than your credit score? While having a high credit score will help you secure a good interest rate, other factors come into play with your finance agreement.
Key circumstances such as the length of the loan, the age of the car you wish to buy, and the current economy can impact your interest rate. Here we’ll share five factors that may affect car loan rates in Vancouver and what you can do to help you get the lowest rate when you’re looking to purchase a vehicle.
The age of the car
Used vehicles often have higher interest rates than the rates given for new cars. This is because used vehicles have already depreciated in value — tens of thousands of dollars have been shaved off from it’s cost when it was a new car at the dealership. Dealers want to recoup the costs that they spent to buy, restore, and market the used car and they can do this by selling it with a higher interest rate. The shorter length of the loan term with a used car means that dealerships may earn less interest over time so an increased interest rate can help them recuperate more money.
The size of your down payment
Placing a down payment or paying a partial cost of the vehicle you want to buy can show lenders that you are capable of saving. Your interest rate will also be better if you place a larger down payment. If you’re having a hard time getting approved for a car loan, placing a down payment can make the difference between successfully securing a car loan and getting denied for a loan.
The length of your loan
A shorter term loan means that your lender will recoup their interest faster and lenders like this idea. Lenders will offer better rates to encourage people to take shorter term loans. As a benefit, you’ll also likely be paying less in interest over the term of your loan.
Lenders will likely take your debt-to-income ratio into account. The higher your salary and the less debt you have, the more likely you’ll be able to repay your debts according to a lender’s perception.The better your ratio, the lower your interest rate may be when you’re looking for car loan rates in Vancouver.
The current economic climate can affect the interest rate for a car loan. When businesses are doing well, they can invest more in financial institutions that can provide a good return on their investments. This will bring more credit and lower consumer lending rates.
If inflation (the degree to which the price of goods increase) is high, lenders will increase their lending rates. If inflation is low, interest rates are likely to be lowered as well.
Not all factors affecting interest rates for an auto loan can be in your control, but there are certain things you can do to help your situation such as choosing an appropriate payment plan, pay off your debts on time, and save for a downpayment.
Looking for a car loan rate in Vancouver? Instant Auto Loans can help you get cash instantly by using your vehicle’s title as collateral. Our loans are short term, easy to qualify for and straight-forward to re-pay. We can help you overcome short-term financial obstacles to help you get the car you may need.