Average interest rates on new car loans rose to 5.2 percent in February, and many consumers are not taking advantage of several ways to lower their rates and save money in the long run,according to USA Today.
While the market rate had fallen to as low as 3.9 percent at the end of 2012, analysts are forecasting that rates are headed higher. Only 31.6 percent of those that leased or bought a new car in 2015 even tried lowering their rates through negotiation or searching for financing elsewhere.
Many buyers tend to focus solely on the monthly payment when shopping for a new car. They pay less attention to the interest rate and overall length of the loan. With this in mind, car dealers are likely to extend loan terms out as long as possible.
The average loan is three months longer now than five years ago.
Rather than accepting whatever rates the car dealership offers, it pays for consumers to take time to shop around for a better rate elsewhere, as tough competition can lead to better deals, according to Greg McBride, the chief financial analyst at Bankrate.com. As an example, a $35,000 car loan with 7 percent APR will cost $3,800 more than a loan with 3 percent APR over five years.
Different dealerships will have different networks of lenders that might offer better terms.
Also, local credit unions, which have been moving into the auto loan market in recent years, can often provide excellent rates to members.
Sometimes the absolute best interest rate does not make the best deal.
Special promotional rates of 1.9 percent or even zero percent often mean forgoing same-as-cash incentives on specific new cars. When adding that money to the total loan amount, the overall costs could end up being more substantial in the long run than those with a much higher interest rate.