Decide what you can realistically afford by calculating total ownership costs, compare total price versus monthly payment, and choose between new, used, or certified pre-owned. Know your credit score and check credit reports, get pre-approved by multiple lenders (including credit unions), and prioritize shorter loan terms to reduce interest and negative equity. Negotiate price first and review contract details before signing.

Start by setting a realistic budget

Decide what you can afford before you shop. Look beyond monthly payments to the car's total cost: purchase price, taxes, registration, insurance, maintenance and interest over the life of the loan. Use online calculators from sites like Bankrate and NerdWallet to model payments with different down payments and loan terms.

Compare total price vs. monthly payment

Dealerships and lenders often advertise low monthly payments by stretching loan terms. A longer term (e.g., 72-84 months) lowers your monthly payment but usually increases total interest and raises the risk of owing more than the car's value (negative equity). Whenever possible, aim for the shortest loan term you can comfortably afford.

New vs. used - consider value and risk

New cars offer full warranties and the certainty of a clean history, but they depreciate fastest in the first year. Used vehicles cost less up front. Consider certified pre-owned (CPO) programs, which include inspections and extended warranties from manufacturers. For used cars, review maintenance records and get a vehicle history report from Carfax or AutoCheck.

Know your credit and how it affects your loan

Your FICO score (typically on a 300-850 scale) strongly influences the interest rate you'll be offered. Get your credit reports and review them for errors. You can request reports through AnnualCreditReport.com - check the site for the most current access options. Improve your score by paying bills on time, reducing card balances, and avoiding new credit inquiries in the months before you apply for an auto loan.

Shop and compare financing options

Get pre-approved from at least three lenders (banks, credit unions, online lenders) before you visit a dealer. Credit unions often offer competitive rates. Compare APRs, loan length, and fees. Beware of dealer-arranged financing that includes add-ons or teaser rates that change later.

Practical tips for negotiation and purchase

Come to the dealership with a firm budget and a pre-approval in hand. Negotiate the purchase price first, then discuss financing. Read the contract carefully: confirm the APR, loan term, down payment, and total amount financed. Consider making a larger down payment to reduce monthly cost and negative-equity risk.

Final checklist

  • Calculate total cost, not just monthly payments
  • Check vehicle history for used cars
  • Know your credit score and review reports
  • Get multiple loan quotes and a pre-approval
  • Prioritize shorter loan terms when feasible
Following these steps will help you choose a car and an auto loan that fit your budget and long-term goals.
  1. Confirm current access options and frequency for free credit reports at AnnualCreditReport.com

FAQs about Getting A Car Loan

Should I focus on monthly payments or the total cost?
Focus on the total cost: purchase price plus taxes, fees, insurance, maintenance and the total interest over the loan term. Monthly payments can be lowered by stretching the loan, which raises total cost and negative-equity risk.
Is it better to buy new or used?
New cars have full warranties and known history but depreciate faster. Used cars cost less up front; certified pre-owned (CPO) vehicles offer a middle ground with inspections and extended warranties.
How does my credit score affect my auto loan?
Lenders use your credit score (commonly a FICO score on a 300-850 scale) to set interest rates. Higher scores usually get lower APRs. Check your credit reports for errors and improve payment history to help lower rates.
What is pre-approval and why get it?
Pre-approval is a lender's conditional loan offer based on your credit and basic financial data. It clarifies your budget, speeds up buying, and gives leverage when negotiating price at a dealership.
How many loan offers should I compare?
Obtain at least three offers - from a bank, a credit union, and an online lender - to compare APRs, fees and loan terms before choosing the best financing option.

News about Getting A Car Loan

How Hidden Car Loan Fees Came Back to Bite UK Banks - Bloomberg.com [Visit Site | Read More]

Up to 14m car loan scandal victims in line for average £700 payout, City regulator announces - The Guardian [Visit Site | Read More]

Car finance options explained: PCP vs PCH vs HP and more - which.co.uk [Visit Site | Read More]

Victims of mis-sold car finance set to get less than £950 per deal - BBC [Visit Site | Read More]

White & Case advises BDK on €700 million auto loan securitisation - White & Case LLP [Visit Site | Read More]

Supreme Court rules on car finance: latest - Autotrader [Visit Site | Read More]

Millions of people could each get hundreds of pounds in compensation over car loan mis-selling - Sky News [Visit Site | Read More]

Loan Repayment Calculator — entertainment only

Enter years and/or months. We’ll add them together.
This calculator is for entertainment only and does not constitute financial advice. Actual costs can vary.