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Four Key Questions to Ask Before Getting A Car Loan

April 20, 2022

If you’re in the market for a car right now, you’re hardly alone. But once you find your ideal wheels – whether new or pre-owned – your next decision is how to pay for it. Here’s what to consider before getting an auto loan.

1. How can I find a car that’s reliable and affordable?

Before you sign on the dotted line, make sure the amount fits into your budget. Do the math on your monthly expenditures, including “cost of ownership,” which covers items like insurance, taxes and fees. Don’t forget to consider ongoing repairs and maintenance, which can take a financial toll, especially if you are looking at an older vehicle. One great resource as you start your shopping is the Valley Strong Auto Finder, designed to streamline the auto buying experience. It has features like DealerRater reviews and ratings from local car buyers, along with true advertised prices with Member Purchase Certificates.

2. Is there anything I should do to boost my chances of getting a loan?

The main thing to check is your credit score, which will impact the amount of interest you pay over the life of the loan. The best interest rates and loan terms are reserved for those with the highest credit score. If your score could use some improvement and you have time to wait before you begin the car shopping process, you should review these steps to take to improve your credit score.  You might see results faster than you think.

3. What should I look for in a car loan?

Car loans come in a wide variety of configurations which can be shifted to fit your overall budget. You’ll want to focus not just on how much the car payment is each month, but how many monthly payments you’ll make (known as the loan “term”) and how much interest you’ll pay over the life of the loan.

As you shop around, make sure to inquire about loans at a local credit union like Valley Strong. Dealer financing is traditionally a more expensive option and credit unions usually offer more attractive rates than banks, as this chart from the National Credit Union Administration illustrates.

A local loan provider like Valley Strong not only offers competitive rates and terms, but will help you find the best auto loan product uniquely suited to your needs and financial situation. They also offer valuable programs like car and payment protection insurance that cover you and your vehicle outside of standard car insurance. Having access to loan protection products like Debt Protection, Guaranteed Asset Protection (GAP) or Mechanical Breakdown Protection (MBP) can give you peace of mind that you’re prepared for the unexpected.

4. Should I get pre-approved?

The shopping process will be easier if you have pre-approval from a lender in hand because they will know you are a serious customer. It also gives you leverage if the dealer tries to boost their sale with add-ons like accessories or maintenance packages or tries to talk you into accepting higher-cost dealer financing.

Even if the dealer says they can shop your loan around to get the best rate, note this may end up damaging your credit because it could result in multiple lenders making credit inquiries, each of which can lower your score. Talking to a lender to get your financing lined up before you begin the process will put you in the driver’s seat during negotiations. And remember, a pre-approval never means you’re obligated to take the loan. If you find a sweet deal on a car that’s less than you expected, you’ll be able to apply for a smaller loan. 

Just like there are cars of every make and model to suit your needs, budget and lifestyle, auto

loans similarly aren’t one-size-fits-all. In fact, it pays (literally!) to shop around for a competitive auto loan program whether you are interested in a purchase, refinance or a lease buyout. The first item on your car shopping list should be talking to a local lender like Valley Strong. Stop by any of our conveniently located branches or apply online to begin the pre-approval process today.