To find the best auto loan rates, it is important to understand all the components of what an auto loan rate is. The auto loan rate is generally related to how long you need the auto loan, and how much equity (down payment) you will have in the vehicle. The type of vehicle may also affect the auto loan rate you are offered as some makes of vehicles historically have higher resale values. Higher resale values are important to lenders because should the auto loan become delinquent and ultimately repossessed, the lender is better protected. Your credit history will also play a role in the auto loan rates you will be offered.
In order to accurately compare auto loan rates you need to make sure you are looking at similar down payment requirements and terms. Most lenders discuss auto loan rates as Annual Percentage Rates (APR). The APR is multiplied against the amount financed. The APR is what the lender makes their profit from. In general, lenders have access to money at an average cost. In order to make their profit they mark up their cost of funds by a set profit margin.
The term of the loan will also affect the rate (APR) that you pay. In general, lenders make car loans available with terms of 24, 30, 36, 42, 48, 54, 60, 66 and 72 months. Some lenders will make loans longer than 72 months on high end vehicles. The length of the loan is usually determined by your credit history, type of vehicle, down payment and your credit history. Most lenders will approve, or make a loan offer, using language such as "approved for a term up to 60 months." What that means is that the consumer can choose any term less than but not more than 60 months.
Choosing the right loan term is usually based on what size payment the buyer wants. As a general rule, the longer the term of the loan, the higher the auto loan rates that you will pay. The advantage of a longer term loan is a smaller monthly payment. If the buyer can handle a higher payment, he/she can generally get lower auto loan rates.
Even if your credit history is not perfect, the right online referral source can find auto loan financing for just about any credit situation. So, even if your credit is not perfect, chances are good that there are lenders that will offer financing for the auto loan you need.