How to Compare Vehicle Loans

Vehicle loans let you finance the full cost of a car and make monthly payments.

Vehicle loans let you finance the full cost of a car and make monthly payments.

The best way to shop for a vehicle is with cash in hand, using money from savings to cover the cost of the vehicle. Unfortunately, this method simply isn't viable for many newly hitched couples. The high price of vehicles often necessitates the use of a loan to cover the full cost of the vehicle. Before you sign on the dotted line, you need to compare your car loan options to determine whether it is the best deal for you and your family.

Compare annual percentage rates for the loan. A higher APR percentage equates to more interest paid over the life of the loan. You want the lowest APR possible.

Find out the fees associated with the loan. Some vehicle loans come with loan origination fees and processing fees. Add the fees for each loan to the amount of interest you will pay, to determine which loan is the overall better bargain.

Ask about special rebates and discounts. For example, dealer financing sometimes is offered as a package with rebates during sales events. Rebates lower the total cost of the vehicle, which affects the total cost of the loan. Be sure to subtract any savings from rebates or other special offers when making your comparison.

Read the fine print. You may want to pay off the loan early but some loans come with pre-payment penalties if you pay off the loan early. Another common penalty is the "early discharge penalty." The early discharge penalty mandates you pay all interest owed on the loan even if you pay it off early.

Calculate the total cost of the loan after taking into account all of these factors. The total cost of the loan includes the cost of the vehicle, the total interest paid for the loan, any other fees or charges -- minus any rebates or incentives. Long-term loans often have lower monthly payments but cost more due to extended interest payments.


  • Credit unions often offer favorable terms and low APRs to their members.
  • Excessive credit inquiries damage your credit score, but credit reporting agencies consider multiple auto applications as rate shopping. They group together all auto loan inquiries made in the last 30 days as one inquiry.

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About the Author

Leigh Thompson began writing in 2007 and specializes in creating content for websites. She has been published online in various capacities. Thompson has an associate degree in information technology from the University of Kansas and is working on a bachelor's degree in business and personal finance.

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