Cut your auto rates

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The Fed’s decision to stand pat on rates ensures that auto loan rates will likely stay at historic lows. Loans have been extremely affordable for car buyers with good or great credit since the December 2008 Federal Open Market Committee meeting when the intended federal funds rate was lowered to a range near zero, where it has sat since then.

But because of the continued tightness in the consumer credit markets, borrowers need a FICO score well above 700 to qualify for the best rates.

If you plan to shop for a car loan in the near future, save yourself some money by beginning to clean up your credit.

Start by checking credit reports and disputing any inaccuracies therein. Paying down debt and always paying your bills on time also helps. Any black marks, especially recent ones, will cost you money.

Second, bring a large down payment to the table and don’t be tempted by long-term loans. Get the shortest-term loan you can manage. Longer-term loans are more expensive over time and can trick you into buying more car than you can comfortably afford.

Lastly, shop for auto financing as thoroughly as you would for the car. Get a loan offer from at least three institutions — your current bank, a local credit union and an online lender — before you set foot on a dealer’s lot. That way you won’t get outfoxed in the dealer’s infamous finance and insurance, or F&I, room. Instead of having to negotiate your interest rate along with price and trade-in, if you’ve got one, the dealer will be forced to try to beat the rate you’ve already negotiated.

For car owners looking to save some money, auto loan refinancing is available. For owners upside-down on their loan or owing more than the car is worth, getting the loan refinanced will probably not be possible.

But for owners who owe less than the car is worth and want a better interest rate, refinancing is a fairly straightforward process, though some minor fees may be involved, for instance to transfer the lien holder.

Before refinancing, check your current loan to see if there is a prepayment penalty, as that could end up costing more money than the refinance would be worth, depending on your interest rates.

A final caveat: Drivers of cars less than 3 years old have the best chance of successfully scoring a lower interest rate through a refinance.

You can compare auto loan rates using Bankrate’s search tool.

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