How to Get a Great Deal on Financing (or Refinancing) a Car

4 MIN. READ

Key takeaways:

 

• Too many Floridians overpay for their car loan by getting financing at the dealership and not fully understanding their loan fees.
• When comparing auto loans, look beyond monthly payments and consider the total cost of financing over the loan term.
• Being familiar with concepts like APR and dealership markups will also help you make a good decision.
• Get pre-approved for an auto loan with transparent fees with Power Financial Credit Union.

Are you overpaying for that new car? We’re not talking about the sticker price, but rather about how much you’re spending to finance your new vehicle.

The right financing deal can save you thousands over the years, but comparing auto loan rates in Florida can be difficult if you’re not familiar with concepts like APR or variable rates.

Read on for some tips designed to help you get a great deal the next time you finance a car. Don’t worry if you’ve already bought a car: A lot of these tips apply when you shop around to refinance your auto loan.
 

Look at the Total Cost of Financing (Not Just Monthly Payments)

It’s easy to focus on monthly payments when comparing financing options for a car. However, this can hide the true cost of financing:
 

• Use loan calculators to figure out how much you’ll spend on interest over the total duration of your auto loan.
• If you’re buying from a dealership, ask for a breakdown of all the costs, including title and registration fees, sales tax, and dealer documentation fees. Some dealers also charge destination fees, GAP insurance and additional fees for securing financing on your behalf.

These additional costs from the dealership are easy to miss because they’re not included in the sticker price for your vehicle, but they’ll be rolled into what you finance. You can try negotiating these costs with the dealership or offer to cover a portion up front to lower the total amount you’re financing.
 

Understanding Interest Rates and APR

Once you’ve figured out the total cost you’re financing, it’s time to look into the details of your loan:
 

• Term: This is the duration of your loan. A 72-month duration is common, but it can go from 24 to 84 months. A longer loan means spending more on interest over the years, but it can reduce your monthly payments.
• Interest: The interest rate is the percentage of the total loan value you pay to your lender for borrowing money. Interest can be fixed with a percentage that won’t change over the years, or variable with your lender calculating a new interest rate every few months.
• APR: The APR, or annual percentage rate, is similar to the interest rate, but it includes any fees you’re paying for the loan (like origination fees). These fees are rolled into the loan and you pay them over time.
• Principal: This is the original amount of money you borrow through your loan. Interest applies to the principal, so a larger principal means you’ll pay more in interest over time.
• Down payment: This is the amount you pay upfront to cover a part of your new car. A bigger down payment reduces your principal and can help you qualify for a lower interest rate.

Look beyond monthly payments and interest rates when comparing financing options. To get a more accurate picture, look at the APR and the term of the loan to figure out how much you’re really spending on interest and fees, as well as how much time these interest and fees will have to add up.
 

Skip Financing at the Dealership

If there is a single tip that will help you save on your car loan, it’s to avoid financing at the dealership. It’s convenient, but you will end up paying more.

Dealers can add anywhere from 1 to 3% to the interest rate the lender offers and keep the difference. This markup, called a dealer reserve, is easy to miss among all the paperwork and fine print. Plus, some dealers will charge you a one-time fee for finding you a loan, which drives your APR up.

The best way to compare car loans is to get pre-approved before you visit the dealership:
 

• You’re skipping dealer markups and financing fees.
• You know exactly how much you can afford to finance when shopping around for a car.
• You can take the time to compare interest rates and fees.

Getting pre-approved is a simple process. For instance, Power Financial Credit Union has a convenient online process for submitting an application, whether you’re in the market for a new car or want to refinance an existing loan.
 

Car Financing (and Refinancing) Made Easy With Power Financial Credit Union

At Power Financial Credit Union, we believe financing or refinancing a car should be simple and affordable. It’s why we offer auto loans with transparent fees and low APRs.

Plus, we have a great program for first-time car buyers with no credit history required, and we partner with Auto Advisers to help you find the right car once you get pre-approved.

Take a look at our auto loan rates now and start the pre-approval process online.
 

FAQs About Financing (or Refinancing) a Car

How do I know if I’m getting a good APR on a car loan?

Shop around and compare offers from multiple lenders, not just the one you're working with at the dealership. Compare both the rate and the fees included in the APR to determine which is the best deal.

Can I pay off my auto loan early without penalties?

Most loans do not charge a prepayment penalty; however, it is always advisable to read your loan terms carefully to confirm.

What documents are required when applying for a car loan?

You’ll usually need proof of income, proof of insurance, identification, and sometimes proof of address.
 

Is it worthwhile to refinance my car loan?

Refinancing can lower your monthly payment or save you money if you qualify for a better rate than your current loan.