How to Get the Lowest Car Finance Interest Rates

Just like any type of financing, there is always room to negotiate when talking of interest rates. However, the interest rate you will get comes down to a variety of factors about you and the car you’re buying. And it’s important that you consider them all -because what may appear to be just a fraction of a percent, could save you hundreds – if not thousands – over the term of the loan.

Before you buy

Ideally, you want to secure the best interest rate before you’re locked into a car loan. That way you don’t have to worry about going through the process a second time. In order to secure the lowest interest rate before you buy, you have to understand where you stand on the ‘ideal customer’ scale for a bank. All the below factors influence the interest rate you can achieve:

  • Your credit score: Take a good honest look at your credit. Those interest rates that you see on banking and comparison websites are always the lowest possible rate – but you may not be eligible for it. How good, or bad, your credit history is will greatly sway where the needle lands on how much interest you’re going to be charged on your loan.
  • Business or Personal Use: If you use your car for business use your car finance will attract commercial interest rates. Commercial rates are almost always lower than interest rates for personal use.
  • Asset Backing: If you own a home or an investment property, the lenders see you as a lower risk to lend to. For many lenders ‘asset backed’ property owners are offered lower interest rates than non property owners.
  • The Car: If the car you’re buying is new, you will generally get a better interest rate than on a used car.
  • The loan amount versus the value of your Car: If you are borrowing $100,000 to finance a car that’s worth $100,000, your ‘loan to value’ ratio is 1, or 100%. If you’re paying out a current loan in order to buy your car, or you are buying a used car that ‘books’ at a lower value (according to RedBook or Glasses Guide) than the loan amount, your LTV can be well over 130%. You can lower your loan to value (‘LTV’) ratio by putting up a deposit on the vehicle. With many lenders, the lower the LTV, the lower the interest rates.
  • Your finances: Next up, what is your financial situation like? Do you have a lot of other loans, or perhaps you’re self-employed? If you already have financial commitments to other lenders, or perhaps have income that’s hard to verify, lenders will – in their own way – ‘penalise’ you for that with a higher interest rate by putting you in a different risk grading.

Finding and Negotiating the lowest car loan interest rate

So what should you do? Irrespective of if you’re applying for a new loan, or wanting to refinance an existing one, to ensure you get a lower interest rate you really should speak with a broker.

There’s a LOT to consider and you don’t want to misstep when you’re dealing in the world of finance and credit. One false move could appear on your credit file and blot your good name for the future.

A good car finance broker will find you the best interest rate by comparing lenders based on your unique situation. That means taking into account your credit score, business/personal use, the car, the LTV, property ownership status, and your personal situation to find you the best Lender and the best approval pathway.

This expertise is something you will NEVER get on those ‘interest rate comparison sites’ which just show the best interest rate for each lender. For example, Lender A might have a lower ‘headline’ interest rate on the loan comparison sites. However, once your situation is taken into account, Lender A might offer you a much higher interest rate than lender B -even though Lender B’s lowest ‘Headline Interest Rate’ is higher than Lender A’s. This is very common, and it’s why you need the expertise of a Broker!

If you’d like to speak with a Broker and compare interest rates from our panel of over 30 Lenders, pick up the phone 1300 301 051 or contact us here for an obligation free chat today.


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