How Can You Lower Your Car Loan Interest Rate?

Besides your mortage or rent, a new or used car is likely your second biggest expense. And to make sure you get the most for your money, you’ll want to consider taking a look into whether you can lower interest rate, which can lower your car payment. Similar to refinancing your home loan, getting a lower interest rate on your car loan is a smart way to improve your monthly budget. 

How to Lower Your Car Loan Interest Rate

If you have an existing car loan, compare your current interest rate to available interest rates. On average, you can reduce your interest rate by 2.4% by refinancing your car loan. That might not seem like much, but for a $32,000 vehicle with an average loan term of 68 months, that adds up to over $2,300 in savings over the span of the loan. Ready to start saving? Here’s how to get started:

1. Check your credit score: Knowing your credit score can help you understand available interest rates. A higher credit score means lower interest rates. 
2. Work on your score: If your credit score needs a boost, spend a little time working on increasing your score so you can take advantage of lower interest rates when you apply for your loan.
3. Consider Refinancing: If you have an existing car loan and think your credit score can help you get a lower interest rate, now might be the time to refinance. Compare your current interest rate to available interest rates based on your credit score. The team at the Auffenberg Dealer Group can help you with this step.
4. Consider Upgrading Your Car: If your credit score has increased but refanincing feels complicated, you can often trade your old car toward a new one and roll that loan into a new auto loan based on your current credit rating.
5. Consider using a cosigner: If you have a limited credit history or your credit score isn’t exactly where you’d like it to be, asking someone with a great credit score to cosign on your car loan can help you achieve a lower interest rate.

What is a Good Interest Rate?

Your loan interest rate depends on a variety of factors, including your credit score and the loan amount. While interest rates vary, O'Fallon area drivers typically see a range of 3.2% to 12.9%. Take a look at interest rates based on credit score tiers. 

• A credit score between 740-800 can expect a 3.2% interest rate (on average)
• A credit score between 680-739 can expect a 4.5% interest rate (on average)
• And a credit score of 680 and below can expect a 6.5%-12.9% interest rate (on average)

If you’re unsure about just what each interest rate means, we can go over how to calculate your auto loan interest in person. Our dealerships also often have promotional rates for drivers with good credit — in fact, many new vehicles can be driven home for 0% APR.

Need More Refinancing Advice? Ask Auffenberg Dealer Group!

To learn more about refinancing your car loan and finding your interest rate based on your credit score, feel free to contact the team at Auffenberg Dealer Group. You can also get pre-approved by applying for financing online.