Are you in the market for a new car? Well, incentives are making a comeback, but high-interest rates are tempering the excitement for car shoppers. In the past, a 0% financing offer for 60 months was common, but now, with high auto loan rates, consumers are seeing these offers as “free money.” According to Edmunds, the average APR for a new car loan was 7.1% in the first quarter of 2024, and for used car loans, it was 11.7%.
Even though borrowing costs are high, there are still benefits to be had from financing offers, discounts, and dealer cash. However, in today’s market, shoppers need to do more research to find these deals. Brian Moody, an executive editor at Kelley Blue Book, advises that consumers need to look at each model individually to find the best deals.
When considering financing options, it’s important to be cautious about longer loan terms. While a longer term may lower your monthly payment, you could end up owing more than the car is worth, creating financial problems down the line. Negative equity situations are on the rise, with a quarter of new car purchases resulting in negative-equity trade-ins.
Before heading to the auto dealer, there are a few things you should do to prepare:
1. Search for available incentives: Look for deals on models that are not in high demand, as popular models are rarely incentivized by automakers and dealers.
2. Know your credit score: 0% financing offers are typically reserved for buyers with excellent credit, so be aware of your credit score before shopping.
3. Get pre-qualified for different loans: Shop around at banks or credit unions to compare interest rates and loan terms. This will also give you leverage when negotiating with dealers.
Ultimately, it’s important to consider the total interest you will be paying over the life of the loan, not just the monthly payment. By being informed and prepared, you can make the best financial decisions when buying a new car. For more exclusive insights and tips on personal finance, be sure to stay connected with Extreme Investor Network.