How to Lower Your Auto Interest Rate

Whether you purchased your car from a dealer and discovered your interest rate is enormous, or you’ve cleaned up a less-than-stellar credit score and now qualify for better treatment on your car loan, it’s time to do some legwork to see if you can save some big bucks by lowering your auto interest rate. Unfortunately, it’s not as easy as calling your lender and changing the rate. By following a few simple steps you’ll be able to lower your interest rate and have a less expensive ride.

Call your auto company to see if they’ll lower your rate. Because you have a contract with the company they probably can’t simply lower the rate. While you’re on the phone, ask if they’ll give you a new loan and find out the interest rate they’ll offer. Don’t sign on the dotted line yet, though. You’ve got some shopping to do, first.

Shop for rates with other companies. Ask your bank or credit union for their best rate on a used car loan, because they’ll usually offer lower rates than a dealer. Gather data on the term, interest rate and any fees associated with a new loan. Vehicle value website Edmunds recommends comparing these rates and fees to some found online at rate aggregators such as, or CapitalOne Auto Finance.

Ask what documents will be needed for the loan. Different than a home loan, where mountains of information is usually required, a car loan lender will usually only need to verify your income and credit score. They’ll also need information on your existing loan because in most cases the new lender will directly pay off your old loan with the funds they lend you to lower your interest rate.

Request your credit report. Rather than being surprised by how bad your credit really is when you’re denied for a loan, check your credit score first to make sure you’re credit-worthy. Americans are allowed one free credit report per year from This report will give you your credit history but not your FICO score, which is usually used to determine the loan. If you’d like to know your score also, visit one of the three credit bureaus online with a credit or debit card. Each site charges a small fee for your credit score.

Apply for the loan. Only apply for one loan because each application affects your credit score. Verify that the details of the contract match the terms you've agreed on, such as the length of the loan, amount borrowed, fees and interest rate. You should receive confirmation quickly about whether you’re accepted for an auto loan at a lower interest rate. If the new loan extends your term, use some of the money you saved on a lower payment and interest rate to make inflated payments and pay your car off early.


About the Author

As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.