Money Essentials

Shopping for car loans and credit

Having a loan approved in advance lets you focus on price negotiations.


When you go to a car dealership to negotiate for a new car, you're in a stronger position if you have a pre-approved loan. Unless your model has a special low-rate financing offer backed by the manufacturer, a local bank or credit union is likely to give you a better deal on a loan. And in most cases, you can take a rebate in place of any low-rate financing and use that to lower your purchase price.

Credit unions typically charge 0.5% to 1% lower interest than bank car loans. You may have access to a credit union where you work, or may be eligible through a professional organization (teachers, government employees).

If you don't have ready access to a credit union, check out your local bank offerings. Websites specializing in loan information will give you a quick rundown on average rates and the best rates in your area.

When you get a pre-approved loan, that commitment usually is good for a month or more. So you can shop for the car you want knowing your financing is ready to go.

In addition to getting financing before you go to a dealership, you also need to do your price homework. That's our next lesson -- setting your target price.

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