The right auto loan can dramatically increase your buying power, letting you drive off in the car of your dreams with monthly payments you can afford. However, the wrong loan can add thousands of dollars to the cost of your vehicle, and many business practices are designed to extract as much money as possible. Below are a few factors to keep an eye on when shopping for an auto loan.

What to Consider When Buying a Car

1. The Interest Rate

Because they’re secured by the value of the vehicle, auto loans typically have much lower interest rates than credit cards and other consumer products. The average auto loan carries approximately 4.2% interest, although your rate can vary based on your credit history and the lender’s policies.

2. Application Fees

Some lenders, especially the on-site financing offices at car dealerships, charge an application fee, based on the value of the car. To minimize your costs, apply for an auto loan from your local credit unions, which usually don’t charge additional fees.

3. Warranties & Service Guarantees

Extended warranties are a major source of profits for car dealerships, and are usually a bad deal for you. Even if you want the peace of mind these services provide, you can usually get them cheaper from a third-party provider that isn’t tied to the dealership.

4. Manufacturer’s Offers

Carmakers often offer very low-interest rates or cash rebates to get you onto the lot, but only those with excellent credit usually qualify. Getting pre-qualified from a credit union will give you a good idea of the interest rate you can expect.

5. Other Fees

Auto dealer financing departments often add on other fees with important-sounding names, many of which are optional. Before accepting a loan, ask about any terms you don’t understand, and be ready to shop for an auto loan from another source if they refuse to give honest explanations.

As a local credit union, Spirit of America Federal Credit Union offers low-cost auto loans to members throughout Nebraska’s Lancaster County. With transparent pricing and low fees, you can always be sure you’re receiving the best deal possible on your new car. Visit their website for more on their auto loans and other products, follow their Twitter for more financial tips, or call (402) 467-1102 to make an appointment today.