Automotive Loans: Shopping Online

by Amy Lillard

(1/23/2013) For many car buyers, the process of negotiating with the dealer on price and financing is overwhelming. It can be stressful and confusing, and buyers can miss out on opportunities to save as a result.

For this reason, the explosive growth of online loan options is a major boon to consumers. Potential buyers can explore all the financing available to them, and in many cases procure loans with better rates long before stepping on the lot.

Why is it beneficial to shop for and secure a loan online, rather than rely on dealer financing?

• Better interest rates. The loan offered by the dealer will include an interest rate that may be close to market value, but it's likely it could be higher. And in the heat of the moment it's difficult to understand if the rate offered is a fair one. Looking at different options online can show you all the rates that are available to you due to your specific financial history. You can then select the best rate among the bunch. It's a critical step — mere decimal points of difference can translate to a significant extra sum paid over the life of the loan.

• More clarity on fees. Loans will always come with processing fees and other costs that may figure into your monthly payments and long-term cost. Online financing sites will often feature calculators that show you the true cost of a loan. These numbers can easily be missed during discussions with a dealer, and be a unpleasant surprise later.

• Reality check. What price can you really afford when it comes to the car and loan? Sometimes this is one of the hardest things to understand and stick to when at the dealership. Online, you can easily play with the numbers — how much would monthly payments be for a certain price of car at a certain rate? How much would you pay over the life of a loan? How do these figures really fit into your budget? Shopping for a loan online ultimately can help you find the amount of car you can really afford, and stick to it.

• Ease of application. Online sites have created simple and quick means to apply for a loan. It's easy and convenient to get several responses at once and compare and contrast your options.

• Streamlines buying process. Having your financing secured before heading to the dealer cuts down most of the pain and time of the process. Knowing exactly what loan you've qualified for, as well as the true amount of your total purchase and monthly payments, helps you keep focused and eliminates some of the pushy sales maneuvers dealerships can employ. You're in a position of power during the purchase process.

Other related articles:

Automotive Loans: Car Buying Incentives

Automotive Loans: What to Know About Interest Rates

Automotive Loans: How Much Car Can You Afford?

Automotive Loans: Types of Financing

Automotive Loans: Applying for a Car Loan

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A frequent contributor to ERATE® since 2006, Amy Lillard is a freelance writer specializing in turning complex information into useful tips and tricks for readers. For questions or topic suggestions, contact Amy at [email protected].

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