Chris Bridges, Founder and CEO, VITAL Card Inc
Time is of the essence with rate shopping. For auto loans, the best recommended time, wrote Lending Tree, is December.
Lending Tree analysts based their thesis on a comparison of data from 2 million of their users. They then discovered through observing this data Annual Percentage Rates for auto loans lowest rates were available in December (as of March 2021).
Why do some loan rates come into “season?” How do you time your rate shopping to the T?
As the credit card with a built-in reward system for responsible spending, VITAL Card analyses these best windows of opportunity for rates.
Why Rate Seasons Change
Kellogg University explained why it’s not uncommon for “predictable and pronounced seasonal variation” to be present in commodity prices. There is a pattern of demand vs. supply of products within the average calendar year.
Things such as travel seasons and sales calendar opportunities factor into the auto loan supply and demand ratio. Because of this “rush hour” traffic around auto loans, you may consider waiting until later in the year to upgrade your vehicle.
What Signs To Look For
Look for patterns in sales, and supply and demand. When researching an auto loan, a good rule of thumb is to look at what dealerships are advertising at certain times of the year. Are the dealers offering special deals on top of the good rate seasons? If so, you may be able to save even more money. Know how much you can slash with good deals, lowest rate seasons, and negotiation.
What To Avoid
When in the rates market, pickiness is encouraged. You want to be selective and avoid taking recommendations at face value.
Mortgage lending experts suggest you should avoid going with the first offer you receive. It’s better to shop a bit. No worries about hard inquiries.
In a previous post, VITAL Blog explains how hard inquiries are counted. Lenders look at a series of hard inquiries in the same bracket as a sign that you are shopping for rates. In that case, they will only count one hard inquiry on your credit report.
It’s also better not to borrow only from your bank because it may be easy or convenient. Putting in the homework to see what is the best rate opens your eyes to options you or your community may never have realized you had.
Why You Should Negotiate
You can have an even better rate if you learn the ropes of negotiating. This is a high impact financial skill for everything from salaries to auto loans.
Knowing that negotiation is something you should do isn’t enough. You also need to know how to successfully do this so that you come out with the most optimal loan rate possible.
How To Negotiate
The Consumer Finance Protection Bureau breaks down the process of decisions you should make at this step.
Decide if the loan is within your budget. Then, find out if there are add-ons being tacked into the loan that are optional. If these add-ons are optional and not services or needs of yours, you can negotiate removing them and reducing the rate.
What You Can and Can’t Negotiate
Add-ons for vehicle rates include things such as vehicle warranties, GAP insurance, credit insurance, and optional features for the vehicle.
Some of these add-ons may be a necessity for your purchasing desire, but some of them may not be. Know what you can customize, and be open about dialogue with the loan provider.
You won’t be able to negotiate taxes or title and registration fees, so you’ll want to add those factors into your auto loan budgets.
Process of Negotiation
First, know what is negotiable. This is information you get by asking the loan provider. Consumer Finance says you can negotiate APR and other interest rates, additional loan fees, the length of the loan, and whether or not there will be a prepayment penalty.
More Asking Power With Great Credit
You have greater power over your negotiation prospects when you have great credit. This is one of the major reasons why having a great credit score is equally important to having a command of budgeting. Bankrate says scores in the 700s range can help you get the best rates.
Summer is the optimal time to build credit. You’ll have the summer travel season and other opportune moments to scale up your credit score. Then, when December comes around again, you’ll be ready to test the thesis of the optimal car loan season.
“This Is the Best Time To Buy a Car,” Lending Tree
“Loans on Sale: Credit Market Seasonality…” Kellogg University
“Know What Is Negotiable,” Consumer Financial Protection Bureau
“How To Get the Best Auto Loan Rate,” Bankrate.com