Is It Still Possible to Get a Cheap Car Loan?

Image: Getty

As Jalopnik’s resident car buying expert and professional car shopper, I get emails. Lots of emails. I’ve decided to pick a few questions and try to help out. This week we are discussing, disappearing cheap car loans, the best strategy for cash purchases, finding an inexpensive family car.

So first off: What happened to all of the super cheap loans?

I have a quick question about the current interest rates, where are they now for well-qualified buyers? Looking to finance $54k for 60-72 months with loan pay being paid off in 36 months. Also are 2% loans gone for good?

Rates are going up and they are not predicted to go down anytime soon. On used cars, I’ve seen people even with tier 1 credit get rates around 4.5 percent from dealers and sometimes lower from credit unions. On new cars, they could hover around 3.5 - 4 percent unless there is incentivized financing from a manufacturer. The super cheap loans are really coming from the automakers, but aren’t as common as they used to be. Some brands are still offering low APR loans and even zero percent financing, but those offers may not line up with the models you’re shopping for.

What I’m finding more and more is on pre-owned cars buyers with tier 1 credit and are getting strong loans from credit unions are being told by the dealer “Yeah, we can’t touch that.” Which means had they not done that pre-approval they would likely be paying more interest for that pre-owned car. However, on new cars, dealers can usually match or beat the rate that smaller bank is offering. Just like shopping for a car, it pays to shop around your loan.

Next, what is the best way to get the lowest price if you are paying cash?

So, I’m a sophisticated buyer and will be negotiating for below invoice price. I don’t need to build my credit etc... I want to pay cash.

What is the best tact to get an offer at the bottom of the “below invoice” range of prices?

Before I get into this, I’m sure many of you are thinking “What difference does it make? A deal is a deal the price should be the same regardless.” As I’ve discussed in previous posts, dealers make their money on loans in addition to other products from the finance office like warranties. So if you show up with cash that is a profit area that is lost to them, therefore some dealers may not be as willing to discount the price of the car if they know they aren’t going to get any more money out of you from the finance office. But that doesn’t mean you can’t get a great deal even while paying cash.

Most cars that are really common can be had below invoice, while on other cars the best “deal” is at invoice or perhaps slightly above. It really depends on the market for that specific model. When it comes to negotiating the best deal, a cash buyer or otherwise solicit a bunch of quotes on the same car and see who is willing to offer the lowest out the door. However, you may not want to tell them out of the gate you will only pay cash. What I would say is “I can pay cash, but I may be willing to finance if there were an incentive to do so. Please send the numbers based on a cash deal.” That way you are comparing apples-to-apples quotes.

Though I will say that sometimes you could be leaving money on the table by only paying cash. Recently I had a client looking for a new Corolla, she was able to pay cash but Toyota was offering a $1,500 rebate if you financed with Toyota. That rebate was lost on a cash deal. She took the loan and the extra savings and just paid the whole thing off right away.


Finally…why is it so hard to find a good family car under $15,000?

I primarily drive my motorcycle to commute, which leaves the car for my wife to use. However, we are expecting a baby next week which changes the whole game of which car we should buy. Ideally, we would like a cross over for the ease of getting a car seat in and out for the baby as well as packing all of the crap we somehow need. I have looked into crossovers quite a bit through my online searching endeavors, but I am having a hard time finding a crossover that has less than 50k miles, is below our $15,000 dollar out-the-door budget, is three to five years old, and still has a clean title. Am I being realistic with those parameters? If not, which one should I change first besides the budget? Should I really be concerned with finding a clean titled car? Should I consider a sedan instead of a cross over?

These are a lot of excellent questions and I can understand your frustration. If you aren’t finding what you want within your given parameters, you need to be flexible. But which parameters to be flexible on is the tricky part. First, only focus on cars with clean titles. While there are some gems out there with damage histories and rebuilt titles, there are plenty of quality cars without those blemishes so best just to filter them out.

As for the sedan vs crossover conundrum, a good sedan can work just fine as a family car and, given that the four-door market is currently struggling, you may find a newer sedan with fewer miles compared to similarly priced crossovers. Focus on a few mid-sized models and take them for a spin to see if the space is right.

Finally, when it comes to year and miles, the three to five year range is reasonable, but don’t get so hung up on the 50,000-mile cap. In this price range condition matters more than mileage. You can have a car with 35,000 on the clock that was beaten to hell while something with 70,000 miles can have a lot more life in it because it was well cared for. I’m not suggesting you look at cars with more than six figures on the odometer but expanding your net to up to 75,000 miles could get you a really solid ride. Just make sure you get it inspected before you buy.

Got a car buying conundrum that you need some assistance with? Email me at [email protected]!

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram