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Key Points:
- Seek 0% financing on less popular car models to save on interest.
- Compare rates from car companies, banks, and credit unions.
- Total cost savings: 0% vs. higher rates can save thousands over time.
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Car buyers are advised to be strategic when shopping for car loans, especially given rising interest rates. It suggests looking for cars that are not selling well, as these may offer 0% financing deals, particularly for electric vehicles (EVs) like the Subaru Solterra or Ford (NYSE: F) Mustang Mach-E. Buyers are encouraged to compare financing options not just from banks, which may have higher rates, but also directly from car manufacturers and credit unions, which often offer lower rates. The conversation emphasizes the significant cost savings possible with 0% financing compared to higher interest rates.
Rising Interest Rates and Their Impact on Car Loans
- Interest rates for car loans have increased, affecting the cost of financing a new vehicle.
- Shoppers need to be more cautious and strategic when looking for car loans to avoid overpaying.
Strategy #1: Look for Cars with 0% Financing
- Some manufacturers offer 0% financing on specific models, particularly EVs that aren't selling well.
- Example 1: Subaru Solterra, an EV from a highly reputable brand, offers 0% financing for 72 months.
- Example 2: Ford is offering 0% financing on 2023 Mustang Mach-E models as they try to clear out inventory.
- Choosing 0% financing can save buyers thousands of dollars over the life of the loan.
Strategy #2: Don’t Assume Your Bank Has the Best Rates
- Banks, even those where you have a long-standing relationship, may not offer the most competitive rates.
- For example, Chase offers over 7% interest to a long-term customer with good credit, which isn't competitive.
- Car manufacturers often have their own financing arms that can offer better rates, such as 3% or 5.5%, depending on the vehicle and promotion.
Strategy #3: Compare Rates Across Multiple Lenders
- Always compare interest rates and terms from multiple sources, including banks, credit unions, and the car manufacturers themselves.
- Credit unions often offer the lowest rates on loans, making them a good option to consider.
- The number of months in the loan term also plays a significant role in the total cost, so factor that into your decision-making process.
Final Advice: Shop for Interest Rates as Well as Cars
- Don't just focus on finding the right car; equally important is securing the best financing deal.
- Be willing to consider less popular models if they offer favorable financing terms that align with your budget.
- Remember that banks may not offer the best rates, so explore all options, including manufacturer financing and credit unions, before making a decision.
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