Guide to Comparing Auto Loans

Searching for the best deal on an auto loan can be stressful. This may simply be because you’re unsure of exactly what to look for when comparing auto loans. The big three when it comes to comparing car loans are the dollar amount you want to borrow, the term or duration of the loan and the interest rate. This and more will come into play as you shop for an auto loan lender. Remember, always shop for a loan, before you shop for the car. Having an auto loan pre-approval before you walk in to that dealership will arm you with great negotiating power and guarantee you have the loan you need when you find the perfect car. Here are six steps for comparing auto loans to help put you in the best shape possible before signing on the dotted line. 

1.     Visit several lenders for better comparison of auto loans.

Be sure to include your local credit union, as they typically offer very competitive rates on auto loans and other loans. Credit unions return profits to members in the form of lower interest rates on loans in addition to other member perks.

2.     Only deal with a reputable lender.

Local credit unions are always your best bet. You may have clicked on a random online lender ad and now you’re unsure if the lender is legitimate. Take the time to check, before you make a mistake you will regret. Check the Better Business Bureau website to learn about any complaints lodged against a particular lender and to see ratings. No legitimate lender will ask you to pay a fee before you get access to your money. Even if there is a loan processing fee, it will typically be deducted from your loan disbursement.

3.     Know what to look for when comparing auto loans.

The APR (annual percentage rate) will determine the amount of interest you pay over the life of your loan. The auto loan term will also help to determine that total interest paid. While a longer term will make for a more attractive and budget friendly monthly payment, it will also increase the total interest you pay. Your term may also impact the interest rate for which you are eligible. Ask the questions for better comparison.

4.     Take the total cost of the loan into consideration when comparing auto loans.

While the interest rate is very important, just because the rate at Lender A is slightly lower than Lender B, doesn’t necessarily mean it’s the best deal. Many car buyers also make the mistake of concentrating exclusively on the monthly payment instead of the purchase price of the vehicle and the total cost of the loan. As we mentioned above, extending out a term can lower your monthly payment, but it will also increase the total interest you pay and increase your chance of eventually owing more than your car is worth. The shorter the term, the more money you will ultimately save. You always want to compare the total payback amount. This dollar amount should include your total interest and any and all taxes and fees involved in taking the loan.  This can application fee, origination fee or any other fees. Watch out, as these fees may vary significantly from lender to lender and can really impact the overall deal. Figuring the total cost of the loan will not only help you make a more informed decision when comparing lenders, but it will also help you to know if you can afford the payment.

5.     Ask if there are any early auto loan repayment penalties.

If you decide to pay off that loan early, you want to know that you’re not going to get hit with high fees. Some lenders may have early repayment penalties, while other won’t. It’s always good to have the flexibility to pay your loan off faster if you wish. You may even want the option of refinancing if a lower rate came along. A lender with no early repayment penalties will give you the flexibility you need to do this.

6.     Use an Auto Loan Calculator Tool to help compare loans.

This will help you calculate monthly payments and see which loans will save you the most money.


With adequate planning and auto loan comparison, you have a better chance of getting an auto loan and car that fits your budget. If you’re not a member of a credit union, you may want to consider joining one to get a better deal on your next auto loan. If you live, work or attend school in Bucks County, PA, you’re eligible for membership in Spirit Financial Credit Union. Learn more at

Greg Quinn