Thanks to a new wave of online offerings, you could land the
auto loan you want without setting foot in a bank or credit union or squaring
off with the finance manager down at the dealership.
got quite a selection of online loans to choose from. Like E-Loan and Capital
One Auto Finance (Formerly PeopleFirst), many banks and credit unions now offer
auto loans over the Web. Major banks that allow customers to apply for auto loans
online include Chase Manhattan, Wachovia, Wells Fargo, SunTrust, PNC Bank and
Union Bank of California.
But the auto loans popping up on
the Web are far from equal. Online applications, rates and customer service all
vary widely. You'll need to shop carefully. Let's get started.
The national average, during the first week of January, for
48-month new-car loans is 7.54 percent and 8.04 percent for 36-month used-car
loans, according to Bankrate.com.
Hop online and you'll find
auto loan rates far lower than that. Some of the lowest can be found at Capital
One Auto Finance, with new-car rates as low as 4.05 percent and used-car rates
as low as 4.59 percent.
To nab these rock-bottom rates, the
customer must apply for the loan online and agree to automatic, electronic loan
payments. If you apply for a loan by phone, fax or mail, your interest rate edges
up a quarter percent. Pass on the automated loan payments and your rate jumps
up another half percent.
It's no surprise that 90 percent
of Capital One Auto Finance customers opt for automatic payments.
you finance your auto loan, it's a good idea to ask about interest rate reductions
for automatic payments. Here's another tip. When shopping for auto financing,
don't overlook the financial institution that handles your mortgage or checking
account. Some banks and credit unions offer interest rate discounts to auto loan
customers with additional accounts.
While surfing the Web
for auto loans, it's important to realize that not all online lenders offer rock-bottom
rates. Some banks offer the same interest rates offered in the branch to customers
that apply online. So being Web-savvy may not make much of a difference to your
auto loan rate.
Watch out for fees. Application fees, paperwork
fees, administrative fees, all kinds of fees can turn up on an auto loan contract.
Be sure to ask about fees before you apply for an auto loan over the Web.
Another thing that people like about online auto loans is the quick response time.
Filling out a five-line application and getting an approval within minutes feels
The speed of an online application
may be nice, but it's far from everything.
If you end
up paying an extra $2,000 in interest costs, does it really matter that your financing
was approved online in less than 15 minutes?
around the Web
Why not take a couple days to comparison shop
and scope out the best possible rate available for someone with your credit record?
cares in the real world if it take two days longer to save $2,000?" says
Remar Sutton, founder of the Consumer Task Force for Automotive Issues.
not all online auto loans give you an answer within minutes anyway. Some online
responses may take hours, even days. And not all online applications are quickies,
either. Some applications are quite thorough and will take more than a couple
minutes to complete.
So do yourself a favor and give yourself
plenty of time to shop around for financing on the Web.
shop early. Beat the bushes for an auto loan on your own and then ask what a dealer
can do for you.
Dealing with dealers
These days, dealers are able to offer financing to just about everyone, even
folks with bruises on their credit reports.
More than anything,
dealers want you to buy the car, and they have relationships with so many lenders
that they'll be able to find financing for most car shoppers, even those with
The only way you'll really know if
the financing offer from the dealer is the best deal for you is by shopping around
for a loan ahead of time. "You know what you're paying for financing and
if the dealer can give you a better rate, more power to the consumer," says
Brian Reed, director of the Internet channel at Capital One Auto Finance.
enough car shoppers enter the dealership with the power of pre-approved financing
in their back pockets.
Lots of folks fall in love with a car
or are so wiped out from shopping that they let the dealer dictate their financing.
"It's amazing how many people allow themselves to be
told how to finance," says James Walsh, author of Smart
Wheels, Hot Deals: Buying, Leasing and Insuring the Best Car for the Least Money.
not a good idea. Let's face it. Dealers are in business to make money. And they
will make a nice chunk of change off your financing if you let them. For more
on the ins and outs of dealer financing, check out this
That's not to say that dealer financing
is all bad. Far from it.
Dealers are privy to zero-percent
financing, which from an interest rate standpoint is impossible to beat. All
those folks who snapped up zero-percent financing offers got quite a deal.
was it the absolute best deal available to them? Maybe not. Many may have been
better off scooping up a hefty cash rebate and landing a low-rate financing deal
off the Web. Use Bankrate's rebate
vs. interest rate calculator to decide which is the better way to go.
Now if you signed on for an auto loan with a dealer in the
past year or so and you're unhappy with the rate you agreed to, you may want to
Use the Web to check out used car rates
in your area. Bankrate.com's auto
loan search engine is a good place to start.
overlook credit unions in your area. Digital Credit Union in Marlborough, Mass.
has been offering online auto loans since 1995. As with many credit unions, you
won't pay extra interest for financing a used car. Used car loans are available
at new car rates.
"We typically save people $1,800 to
$2,000 on interest over the length of their loans," says Tim Garner, vice
president of marketing and strategic planning at Digital Credit Union.
a good chance you prowled the Net for auto pricing and reliability studies before
you bought your car. Why not use the Web to knock down the interest rate on your
"Some of the rates being offered by companies are
extremely competitive, extremely good," says Ted Brown, auto finance practice
manager at BenchMark Consulting International. "Why not take advantage of
it, especially on used cars?"
Updated: Jan. 11, 2005