how to buy a used car with a bank loan

The interest rate lenders charge is based largely on your credit score, which is a number that credit bureaus assign to you based on how much debt you have, how good you’ve been about paying bills on time, how long you’ve been using credit and your debt to income ratio, which is the amount of debt you have versus how much money you earn.
While you should certainly consider the loan the dealership offers, the best way to get the lowest interest rate is to bring a pre-approved loan from your bank, credit union or third-party lender when you go to the dealership.
The lender will use your social security number to pull your credit history and credit score and decide whether or not to make you a loan offer based on that information, as well as your income, expenses and debts.
That’s why splitting up the financing and purchasing of your car is a good idea: First, you can shop around for the best credit-union car loan, and then you go to dealer and focus on negotiating the purchase price of the car.
Forgoing dealer financing also allows you to focus on the features and purchase price of the car you want — a far more important and useful task than focusing on the monthly payment figure.
If you borrow the money over four years, your monthly payment will be $460.59. At the end of four years, you’ll have paid $2,108.12 in interest.
If you borrow the money over ten years, your monthly payment will only be $211.12, but at the end of 10 years, you’ll have paid $5,455.72 in interest.
Saying you’ll be paying in cash doesn’t mean you’re going to open up a briefcase with bricks of money inside, it just means that you’re not interested in dealer or manufacturer financing.
But the length of the term for a home loan — most require payments over at least 10 years, with penalties for early repayment — will send your total costs through the roof, even after the tax savings.
Bank of America customer? Shop with added confidence with our customer-exclusive 0.15% auto loan rate discount for private purchases and vehicle refinancing.
Bank of America customer? Shop with added confidence with our customer-exclusive 0.15% auto loan rate discount.
While that may sound obvious to someone who has applied for one of these loans before, if you are a first-time car buyer, you may not realize how important your credit score is when it comes to getting a loan.
A high credit score can help you get a low car loan rate, which in turn saves you money on interest.
Even if you plan to pay your loan by mail or at a local branch of your financial institution, it’s a good idea to sign up for the online service so you can check your balance and payments if you need to, and so you’ll be able to make payments online if you are traveling, for example.
Free Credit Check & MonitoringSign up for a account and get your FREE Credit Score plus personalized Action Plan to help you improve it.
Your credit score will play a key role in the rate you’ll pay for your loan.
You can shop for an auto loan online, as well as through a local credit union or bank.
Don’t have great credit? You may still be able to get pre-approved for a car loan with bad credit, but your interest rate will be higher.
Free Credit Check & MonitoringSign up for your and get a FREE credit score plus personalized Action Plan to help you improve it.
It’s also a good idea to get your free credit score to see where you stand (and you can do that using’s Credit Report Card).
As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change.
Your credit score is based on the information in your credit reports, so to make sure that your credit score is accurate it’s a good idea to also get your credit reports.
Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
Just understand that you probably won’t see the same credit score the auto lender will see.
A leading global financial company, opens sub-menu.
ATMs and branches nationwide, opens sub-menu.
Auto Loans , opens sub-menu.
The Chase product or service you selected is not available in the ZIP code you entered.
Debit & Reloadable Cards , opens sub-menu.
Mobile Banking , opens sub-menu.
Online Banking , opens sub-menu.
Checking Accounts , opens sub-menu.
Planning & Investments , opens sub-menu.
Why Chase? Opens menu.
A commitment to the U.S. economy, opens sub-menu.
A partner in your community, opens sub-menu.
Savings & CDs , opens sub-menu.
Home Equity , opens sub-menu.
Mortgage , opens sub-menu.
Auto loans are available from traditional banks (Chase, Wells Fargo), credit unions (Navy Federal, Boeing Employees Credit Union) or an online lender such as Up2Drive, Capital One or Blue Harbor.
If you wanted to buy a used car from a private seller or independent dealership, you would have to take out a personal loan, which usually carries much higher interest rates.
Once approved, you can close your used car loan at a local Wells Fargo store where you’ll get a check for the price of the vehicle you’ve chosen.
Or, Wells Fargo may be able to help you line up your used auto loan right away if you’re ready to buy a used car now.
After you’ve chosen your vehicle, visit your local Wells Fargo store to close your used car loan.
If you’ve already decided on buying a used car and know what it costs, Wells Fargo may be able to help you with your used auto loan.
During the life of the loan, if the monthly ACH (automated clearing house) payment from your Wells Fargo deposit account is discontinued for any reason, or you no longer meet the relationship requirements, you will lose the selected discount.
3 You may be eligible for a discount for having a Wells Fargo relationship and deposit account from which your monthly loan payment is deducted.
Whether you’re planning to buy a used car at a dealership, online or from a private party, you can shop like a cash buyer with used car loans from Wells Fargo.
If you sign up for automatic bill payer with your bank after you are approved, then after you fill out your financing papers at the dealer, they will tell you what day of the month you loan will be deducted from your account and how much.
First time car owners are hard to get financed unless you have credit w/a credit card or other loans (to show you have established credit), you have lived at your address for a long period, you have a bank account and worked at your place of employment for a while.
Here’s the bottom line: Any change to your credit score from shopping will be a minor price to pay for getting the best deal on a car, mortgage, or student loan.
For specific types of loans — auto, mortgage, and student loans – credit scoring models are also designed to take shopping for a loan into account.
According to one major credit scoring company, any inquiries that took place in the 30 days prior to that scoring will not affect your credit score.
Let’s say you are looking around for an auto loan and you authorize five lenders to check your credit score.
All those credit checks — the industry calls them “inquiries” – should either count as zero or one inquiry, if the inquiries are made in a short period such as fourteen days.
And even if your credit history is less than stellar, the impact from shopping around for a loan is likely to shave off between one and five points.
Tip: When you apply for a loan and the lender checks your credit, a credit score is created for the lender.
Credit scoring companies consider consumers who apply for several new credit lines in a short period of time to be a higher risk and they adjust credit scores accordingly.
If you have a great credit history, shopping around may have no impact on your credit score at all.
Nearly 75 percent of auto loans that finance companies made in the second quarter went to subprime borrowers compared with 18.1 percent for banks, according to Experian Automotive.
During the financial crisis, banks often publicly disclosed the total mortgages they held and how many of those were subprime, only to reveal months later that they had tens of billions of additional exposure from secured loans to subprime mortgage finance companies, subprime mortgage bonds that were packaged into new bonds, and so on.
Other banks, including Capital One Financial Corp and JPMorgan Chase & Co are also players in the business of lending to auto finance companies, according to Colonnade.
The independent auto finance companies that banks are funding, including Exeter Finance Corp and Westlake Financial Services Inc, tend to cater heavily to subprime borrowers.
The person familiar with the matter said regulators are asking banks for information about not just loans they made, but financing they have provided to other lenders in the sector, such as credit lines to finance companies.
It is also the largest underwriter of bonds backed by subprime auto loans, having sold $3.3 billion of these securities this year, according to industry publication Asset-Backed Alert.
If auto finance companies that specialize in subprime loans fail in an economic downturn, they may not present much of a wider danger to the financial system.
In addition, since 2011 Wells Fargo has extended more than $1.5 billion of credit lines to some of the largest subprime car lenders through its Des Moines, Iowa-based subsidiary Wells Fargo Preferred Capital Inc., according to merger advisory firm Colonnade Advisors LLC.
In fact, dealer financing generally only makes sense in a very specific scenario: a) you have excellent credit b) you’re buying a new vehicle c) you’re taking advantage of special offers d) you resist the dealers’ tendency to try to sell you “extras” and “add-ons” that you don’t need.
The only other scenario in which it may be to your advantage to purchase your vehicle via a loan through the dealer is if you have weak credit and cannot otherwise qualify for financing.
Seek pre-approval and/or research financing packages online through banks and other auto loan companies to learn what the best possible interest rates you might get look like.
If you have strong credit, banks and credit unions offer the best financing terms for an auto loan, and especially if you’ve already developed a good relationship with them.
Alternatives to seeking dealer financing include what are called “direct purchases” or “direct loans,” which you can obtain through banks, credit unions, or specialty financing companies.
The main reason it doesn’t pay to get a dealer loan is that not only are interest rates higher but they contain hidden finance charges or “mark-ups” that dealers tack onto your actual loan, often without advising you that they’re doing so.
Although dealers who slip mark-ups into their financing deals are increasingly coming under scrutiny by consumer protection advocates, the practice is still widespread enough to put off the prudent, empowered buyer who does not absolutely have to work through a dealer for financing.
BMO Harris Premier Services represents a combined service approach of BMO Harris Financial Advisors and BMO Harris Bank, each a part of BMO Financial Group.
Securities, investment advisory services and insurance products are offered through BMO Harris Financial Advisors, Inc.
Banking products and services are provided by BMO Harris Bank N.A. and are subject to bank and credit approval.
BMO Harris Bank N.A. and its affiliates do not provide legal or tax advice to clients.
BMO Harris® and BMO Harris Bank® are trade names used by BMO Harris Bank N.A. Member FDIC.
Please review the privacy and security policies of web sites reached through links from BMO Harris web sites.
With lower credit, you’ll probably still be able to get a car loan, but you might be limited to what the dealer offers, and you could wind up paying high single digits or even double-digit interest rates, McBride says.
(Again, this is for 36-month loans.) McBride says Bankrate sees some credit union rates dropping below 3%, similar to what banks are offering.
“Credit unions provide 40% lower interest rates for new car loans and 44% lower interest rates for used car loans than traditional banks,” WalletHub says.
Historically, big banks haven’t been as competitive on car loan rates because they didn’t have to be; they had mortgage and credit card portfolios that earned them a lot of money.
Lowest rates and maximum terms based on Coastal Federal Credit Union’s Qualified Loan Program.
Buying a vehicle is an exciting, rewarding experience and Coastal is here to make sure you get the vehicle you want with flexible terms and competitive rates.
Ready to buy your next vehicle? Coastal offers competitive rates and flexible terms on new & used vehicles.
Need more fun in your life?  CB&S Bank offers a variety of recreational vehicle loans including:  motorcycles, boats, jet skis, motorhomes, RVs, and travel trailers.
Need a loan and need it fast?  Our Express Loan is designed to be a quicker fix for smaller financial needs such as travel, taxes, holiday expenses, or any other need that might arise.
A home equity line from CB&S Bank can be an excellent way to make home improvements, finance a college education, buy a car, or make that dream vacation a reality.
A loan from LegacyTexas Bank can help you make a special purchase, buy a new or used automobile, motorcycle or RV, consolidate your debt or get cash for unexpected expenses or home improvement projects.
Bank products offered through LegacyTexas Bank, Member FDIC, Equal Housing Lender.
Insurance products and title products are not FDIC insured, not insured by any Federal Government Agency, not a Deposit, and not Guaranteed by any Bank or Bank affiliate and may go down in value.
LegacyTexas Insurance Services and LegacyTexas Title are subsidiaries of LegacyTexas Bank.
Insurance products offered through LegacyTexas Insurance Services and title products offered through LegacyTexas Title.
Gold Line of Credit is a variable rate, unsecured loan with an 8.00% floor and credit line amounts available between $2,000 and $25,000.
Rates based on automatic debit from a LegacyTexas Bank checking account.
Not all buyers will qualify for lowest APR, which varies by creditworthiness of a buyer as determined by LegacyTexas Bank.
However, that choice increases the total cost of your auto loan and usually leaves you ‘upside-down’ (meaning you owe more on the vehicle than it’s worth) for years to come.
One of the first things you should do before applying for an auto loan is review your credit.
In most cases your car dealer won’t have the best auto loan (but in some cases the dealer’s offer can’t be beat).
If you’re going to borrow for your auto purchase, it pays to know how to get a great auto loan.
Start thinking about your auto loan even before you start looking at cars.
The most important point here is that you don’t have to get your auto loan from the dealership.
The terms of your auto loan will determine how much you pay now and how much the auto loan costs overall.

No tags for this post.