Getting the best car loan

Posted by Becky Gulden

CHARLOTTE, NC (WBTV) - It's day 13 of our series 20 days, 20 ways to survive the economy.

Now may be one of the best times ever to buy a new care since prices are incredibly for many models.

But what good is getting a good price on the car if you pay too much for your car loan?

A key to saving money when you buy your car have your financing arranged before you even set foot on the car lot.

"The best thing to do is to know how much you can afford first, and then get pre-qualified for a loan. That way you know how much money you can afford to spend, and then do a little research in picking out the car you want," said Christine Mitchell a financial expert.

Christine Mitchell is the director of the Jefferson Pilot Federal Credit Union.

She says before you begin shopping for a loan the most important thing to do is to to look at your finances and determine how much you can realistically afford to pay for a car.

Then it's time to look for your loan.

And there are almost as many options out there as there are cars to choose from so do your homework!

"You have to shop around, it's just like anything else these days, you can shop around on the internet, get pre-qualified at your bank or your credit union, and find out how much you can afford," said Mitchell.

Just an hour on the internet could literally save you hundreds of dollars. The more time you're willing to invest the more you can save.

But don't just rely on the internet.

Be sure to check with your bank or credit union you already have a relationship with them and they may be willing to give you better incentives to keep your business.

Another important factor in getting the best deal is knowing that the lowest interest rate is not always the best deal.

"A lot of times zero percent financing you have to pay it off in three years or less. There's prepayment penalties that may be involved, and they're also including that you're automatically going to buy insurance and warranties with that," said Mitchell.

In today's economy typical car loans are going for anywhere between 5-percent and 8-percent interest and the better your credit rating, the better interest rate you can get.

And that rate can really make a difference, you could save hundreds of dollars over the life of the loan.

For example:

If you took out a 15-thousand dollar loan over 60 months you would save 420-dollars by getting a 5-point-9 percent loan versus a 6-point-9 percent loan.

"In today's budgets, people's budgets, you've gotta get what you can pay for, and sometimes you can't afford that higher payment, but if you can, it's well worth it to pay off early at that lower rate," said Mitchell.

No matter which loan you choose be sure to check the fine print for hidden charges, like application fees, insurance, and warranties.

There are many tools available to you to help you get started on looking for your loan.

First, you'll want to get a budget worksheet.

Balance track-dot-org has a good one, but there are certainly others available.

Also, Bank Rate-dot-com has good information on comparing loans.

But again, there are other good web sites available.