Choose a country
United States
Choose a city
Choose a city
Select language
Select country
Choose a country
United States
United States
Việt nam
Select city
Choose a city
Choose a city
Washington, D.C.

How to get a car loans in the United States

8 min.

A client should inquire possible offers from several lenders and compare them in order to be offered the best rate.

How to get a car loans in the United States

For this reason, it is important to choose the best lenders and receive a pre-approved loan before heading to a dealership center. Below are steps a client should follow as well.

1. Verify a credit report

Credit rating and income will determine the loan amount available and a rate of interest.

A client shouldn't apply for a car loan without checking a credit report first. In case a report contains any mistakes or misinformation like fraud, it can result in denying a loan or a very high percentage rate will be offered.

Customers have the right to receive at least 1 free copy of their reports once within every 12 months from each of 3 major reporting bureaus which are Equifax, TransUnion, Experian. A lot of credit card issuers, banks and personal finance providers also supply clients with free online credit ratings and reports.

If errors or fraud evidence were detected while a credit report checking then they should be corrected before applying for a car credit.

Provided an applicant has bad credit rating that is usually 600 points or less and there is no need to buy a car right away then it is worth considering to spend from 6 months to a year for improving credit score. Timely redeeming a credit card balance can help amend the rating and allow to qualify for a more beneficial loan.

Important! If your credit report contains any mistakes they should be corrected prior to applying for an auto loan.

2. Submit applications for a car credit to multiple lenders

After available loans have been checked it's time to examine types of creditors which can be divided in the following categories:

  • Large national banks
  • Credit unions
  • Community banks
  • Dealerships
  • Online lenders that only issue car loans
  • Captive lenders

Even if a customer is planning to get financing through a dealership it makes sense to compare the quotes of the first three types of lenders because a bank or a credit union may propose preferred rates for their clients. Car loans options may be compared online as well.

In case a customer wants to purchase a vehicle from a private individual rather than a dealer or broker, they need to ensure that this is permitted by a specific loan provider as some have restrictions on where a car will be bought.

Here are some important financial conditions that may be encountered when shopping:

    • Per annum percentage rate: the interest and fees to be paid for a loan.
    • Loan term: time span within which a credit must be repaid. Finanso recommends to apply for the term no longer than 60 months for new cars and 36 months for used ones.
    • Initial instalment: the amount to be paid when receiving a loan regarding the vehicle's value. This reduces a credit sum.
    • Taxes and charges: upon buying a car such additional costs as government sales tax, paperwork fees and other possible dealer levies are included in the total price.

3. Obtain preapproval for a car credit

Once the search has been narrowed to just a couple lenders the procedure of percentage rate quotes' request and offers comparison should be undertaken.

Note! Contacting with several loan providers enables to get the best rate because each of them evaluate credit reports differently. As a result, car loan percentage rates can vary greatly.

But customers should remember that it can be confusing as some lenders allow prequalification only requiring a soft loan while others provide preapproval with a hard loan inquiry that causes temporary decrease of credit rating. Prequalification estimates the expected rate but preapproval renders a more specific rate of interest proposal. Thus, prior approval protects from higher percentage rates levy.

For getting a loan preapproval customers need to provide issuing companies with their personal information including social security number, income and other debts' report. It is important to submit applications to all considered lenders affording preapproval within two weeks as multiple credit requests are grouped together within a short time period and counted as one request.

The way preapproval differs from prequalification should be kept in mind. Provided a customer is really aimed to purchase a vehicle getting a preapproved loan grants several benefits. Thus, the position of a client at negotiating with a lender is strengthened and simplified and allows to bargain not only on monthly payments but also on the car price.

On the other hand, prequalification's results will be as accurate as the information provided. This means that the final percentage rate can appear to be significantly higher than an original one. In both cases, with prior approval and prequalification, the final rate may change slightly depending on the vehicle chosen.

Note! Apply to all lenders providing preapproval within 14 days in order to reduce the impact on credit rating.

Preapproval or prequalification

Preapproval means that the credit report as well as other data have been reviewed by the lender in order to determine the amount and rate of interest the customer is likely to receive.

Preapproval summary

      • Hard credit
      • Clients generally receive a suggested rate but vehicles must also meet the lender's requirements
      • Turns a customer to a cash shopper at dealerships

Prequalification means that an applicant is likely to be issued a loan at a given rate according to personal and financial information.

Prequalification summary:

      • Soft credit
      • A suggested rate can be amended after complete checking of the client's creditworthiness.
      • Frequently a wide range of rates is offered but this does not guarantee that any will be applied

Once an application is submitted a customer will be contacted by several lenders or dealers. Creating a separate e-mail address and even a phone number it's a worthy idea for not to be bombarded with various phone calls and e-mail messages. In this case messages can be checked when it is convenient.

4. Use a credit offer to determine the budget

Preapprovals indicate the maximum amount accessible for borrowing but this is not the car price that can be bought. Usually, additional 10% are needed to cover taxes and charges. The auto loan calculator is a helpful tool for applying for a credit. To find a proper monthly payment that is suitable for the budget the customer needs to enter the initial instalment amount, the vehicle value as well as credit terms.

If the resulting fee is of too high level a client should remember that a preapproval offer just provides with the information about the amount limit and actually less funds can be borrowed. Being able to make credit payments conveniently even if the bigger credit sum is available for being issued is much more important.

5. Find an appropriate car

When offers has been received and the maximum vehicle cost determined it's time to choose a car.

To avoid disappointment loan offers should be check out carefully regarding the following issues:

      • Brands excluded. Some creditors exclude certain car manufacturers or vehicle types from financing.
      • Restrictions for funds usage. They can be applied if a customer wants to purchase a car from a private seller.
      • Requirements for dealerships. Sometimes purchasing through a specific dealer network is required.
      • Time limits. In most cases a loan issued must be utilized within 30 days. If this has not happened it is better to contact the lender to ask for the offer extension.

6. Check the dealer's credit offer.

Once a proper vehicle has been found and a test drive has been taken it is still possible to get a better percentage rate that the dealer may provide.

Note! Automakers set up their own banks exclusively for purchasing cars through dealership centers and sometimes offer rates of interest lower than average ones at the market.

When dealerships find out that the client has got a pre-approved established rate, they will likely do their best to propose a better rate. It's worth submitting an application to clarify a possible percentage rate.

Provided a customer doesn't want to proceed negotiations regarding the rate then the seller should be informed about it and told that the customer is a “cash buyer” as it means to bargain only on the car price and not on the monthly instalments.

Having a pre-approved loan enables to negotiate with the dealer about getting a better rate.

7. Select and apply for a loan

The best option is when the dealership's offer exceeds the pre-approved rate while other conditions remain the same. This loan can be undoubtedly obtained. But reading the contract prior to signing is of high importance in order to be sure it contains no pitfalls, for example:

  • Longer loan term. Depending on the per annum rate of interest, adding even 12 months to the term can result is increase of the amount to be repaid. Various dealer rates with longer credit should be checked.
  • Hidden charges. In addition to the vehicle cost, sales tax, paperwork and registration fees will be covered. That's why all additional charges deserve particular attention.
  • Early repayment penalty. It is not applicable to most auto loans but anyway worth being checked.
  • Unnecessary services. These may include gap insurance that can normally be obtained at a lower price elsewhere.

In case a customer has decided to accept the pre-approved offer then the lender's instructions should be followed for a loan application completing and funds receiving. In some cases, the dealer representative may contact the loan provider to initiate financing, while in others the customer has to implement this procedure.

If the vehicle is being purchased from a private seller, cash or a receipt will most likely be asked for. Once the car has been chosen a customer needs to contact the lender to finalize the deal. After that the contract needs to be signed and better to double-check it for the abovementioned items and remember that they can easily be avoided if you don't deal with dealerships.

The article was useful


We use cookies to save login details and improve the quality of the Service by identifying the information you are most interested in, tracking trends, measuring the effectiveness of advertisements, or storing information that you might want to receive on a regular basis. If you choose to disable cookies, many of the free features of the Service will not function properly.

Manage settings

Strictly necessary cookies

Strictly necessary cookies are the only cookies that do not require the user's consent. They can be set before the cookie banner appears. This is a type of cookies that allows online shops to store items in your cart while online shopping, and is an example of strictly necessary cookies.

Functional cookies

Functional cookies allow websites to save the user's preferences and the choices made on the website including the user's name, area and language. These cookies can save your preferences in order to improve the user experience on the website.

Performance cookies

Performance cookies are cookies used specifically to collect data about the way visitors use the website, which pages of the website they visit most often, or whether they receive error messages on the website. These cookies only track the performance of the site when the user interacts with it. These cookies do not collect identifying information about visitors which means that all the data collected is anonymous and is used only to improve the functionality of the website.

Targeting cookies

This website and our trusted partners use third party cookies. They are used to display personalized advertisements on this and other websites. The selection of ads is based on the search history and considers, among other things, the housing options and prices that you have viewed. These cookies are also used to integrate social networks with our website allowing you to “Like” pages or certain product descriptions on social networks.
Finanso™ uses cookies to personalize services and improve the user experience of the website. If you do not want to use cookies, please change your browser settings.