Here Are 6 Very Specific Steps You Can Take to Get a Cheap Car Loan

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Don’t borrow more than necessary for your next vehicle. 

Buying a car is an expensive purchase, and one that many people need to borrow the funds for in order to afford. A large monthly car loan payment can unfortunately have consequences, leaving you with less money to put in savings or spend on other necessities.

The good news is, you can get a cheap car loan if you take a few very specific steps to do it. Here’s a six-step plan to make a low-cost loan happen for you.

1. Use the Costco auto program

The Costco auto program is a feature that members can benefit from — and it can provide so much savings that it’s even worth becoming a Costco member to take advantage of.

Costco partners with dealers who are trained in its program processes and who agree to offer preset competitive pricing. Since Costco works with multiple dealers, you can also get price offerings from many in the program.

In fact, one Ascent staffer who took advantage of this program recently had multiple dealers competing for their attention through this program and ended up being able to get a car for below the MSRP.

2. Shop around with different dealers

There’s no reason to commit to working with a specific dealer if you’re looking for the lowest price car. In fact, playing different dealers off each other can be essential if you want the lowest price vehicle — which, in turn, enables you to borrow less and get the cheapest possible car loan.

If one dealer makes you an offer, see if you can get another to beat its price. By doing this a few times with different dealers, you can make sure you get a rock-bottom price on your new wheels.

3. Get the maximum value for your trade-in

If you have a vehicle trade-in, getting the highest price for it will further reduce the amount you must borrow and make your car loan cost even less.

The used car market has been very competitive lately, so look up what your vehicle is worth before you go to the dealer so you don’t accept a lowball offer. You can start negotiations off on your terms with knowledge of just how valuable your vehicle is.

A clean vehicle also shows better and is likely to fetch you a higher price, so it may be worth paying to have your vehicle detailed before you go to the dealer to negotiate.

4. Negotiate your drive-off price, not your monthly payment

Many dealers try to get you to focus on the monthly payment you’ll pay for your vehicle, rather than the total cost. Focusing on this is a big mistake as dealers can use tricks like stretching out your payoff time over a long period to make your loan look cheaper.

Instead of negotiating based on the monthly payments you’ll incur, get each dealer to give you a drive-off price inclusive of costs and fees. This makes it easier to see what the best deal is and to assess whether the price is within your budget.

5. Compare your options for car loans

In addition to shopping around for the best price on the car, you’ll also want to shop around for the best price on your loan. Different lenders may have widely different interest rates and fees.

Many people assume the dealer will provide the best financing, but that’s not always the case. Get some quotes online from credit unions, local banks, and national lenders so you can see all of your borrowing options.

6. Be prepared to walk away

Finally, if you really want the best deal, be prepared to walk away if you aren’t offered a fair value for your trade-in or a good purchase price for the vehicle you have your eye on. There are always other cars out there, and dealers will be a lot more willing to work to earn your business if they know you’re willing to leave the negotiating table.

If you follow these six steps, you can hopefully get a great price on a car and a great rate on a car loan so you end up with the cheapest possible car loan you can get.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Fetch. The Motley Fool has a disclosure policy.

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