When you understand the auto lending process you’re on the road to financing your new ride with confidence.

Once you’ve found a car you want and done your homework on how much you can afford, it’s time to get an auto loan. This article will help you understand the process so you can finance your new or pre-owned car with confidence.

Credit scores count

One factor every lender looks at is your credit score. Before you apply for an auto loan, check your credit report. Correct errors that bring your score down. A higher credit score can lead to a better interest rate.

Be judicious about applying for auto loans because each time you apply for a loan your credit score is impacted. It doesn’t matter if the loan is approved or whether you use it. If you apply at multiple lenders, do it within a two-week period; credit reporting agencies will consider anything in a two-week window as a single inquiry.

Keep your transactions separate

The purchase, financing and trade-in are three distinct transactions. You’ll get the best deal by negotiating each separately.

If you get preapproval for your loan before you head to the dealer’s lot, it’s easy to keep talks focused on the car’s price. (Learn how to negotiate for a car like a boss here.)

Shop for the best loan

Compare rates among lenders to find the best deal. You may be surprised to find that credit union interest rates can be up to two percentage point less than a bank’s. For example, at the time of this post’s writing, a major national bank’s starting rate for a 4-year used auto loan was as low as 5.64% APR. The rate for the same loan could be as low as 3.69% APR* at Consumers.

Get current Consumers auto loan rates here.

Understand all the terms before you sign

Before you sign any loan agreement, take time to read the entire document—including the fine print. Make sure you understand all the terms, including:

• The interest rate. If the rate is variable, calculate if you can afford the highest possible payment.
• Prepayment terms. Some loans penalize you for paying off the loan early or refinancing.
• Arbitration clauses. The agreement may stipulate binding arbitration that takes away your right to sue if there are problems.
• Everything promised verbally. If something is missing, don’t sign until the contract includes it.
• The numbers. Check the math to make sure the figures for down payment, interest, length of loan, and monthly payments agree with what you negotiated.

As always, we’re here to answer any questions you have about auto loans. Stop by your local Consumers office or call us at 800-991-2221. We work closely with the top dealerships in West Michigan to make sure your financing options are safe, secure and customized to meet your budget.

Is it time for new set of wheels? Call us at 800-991-2221 or check out our auto loan options online. Our auto loan professionals are here to co-pilot your financing journey.

*All loans subject to approval. Rates, terms and conditions are subject to change and may vary based on credit worthiness, qualifications and collateral conditions. Federally insured by NCUA