Nine Ways to Get the Lowest Rate on Your Auto Loan

1. Pay Bills on Time: If you don't make a habit of sending timely payments to your creditors, you won't get a low rate on the auto loan. Before applying for vehicle financing, make sure that all your payments are current with creditors.

2. Wait Two Years after Repossession: Auto repossessions negatively impact your credit score. The best way to get approved for a new loan at a decent rate is to wait two years, and improve your credit during this time.

3. Wait Two Years after a Bankruptcy: A recent bankruptcy makes it practically impossible to finance a vehicle at a low rate. If you need an automobile immediately following a discharge, expect to pay three or four percentage points higher than the norm. If possible, wait at least two years and rebuild your credit rating.

4. Establish Credit Beforehand: If you apply for a vehicle loan with no credit history, the lender may approve your loan request, but they'll also charge a much higher rate because you're considered a risky applicant. Before applying for financing, obtain a secured or unsecured credit card and maintain the account for at least six months.

5. Use a Co-signer: It can take several months to establish a solid credit score. If you need a vehicle, but can't finance based on your credit history, ask a close relative to co-sign the loan.

6. Save for a Down Payment: If you want to lower your interest rate by a few points, save money for a down payment. A down payment puts the lender's mind at ease. Auto buyers with poor credit can save money on interest payments with a down payment.

7. Shop Around: You don't have to accept the dealership's financing. Savvy shoppers know the value of shopping around and comparing loan quotes. Contact local financial institutions, or get quotes for a vehicle loan from an online auto loan broker.

8. Choose a Shorter Finance Period: Financing a vehicle for two or three years is costly, but you'll save money on interest. Individuals who can't qualify for a low rate because of poor credit might consider this approach. In many instances, the auto lender will lower the interest rate by one percent or more.

9. Reduce Debts: If your debt to income ratio is high, lenders will classify you as a risky borrower and charge a higher rate. This problem can be easily avoided by paying off or reducing your consumer debts.