Top 5 Tips for Getting the Best Auto Loan Rate

The interest rate on your auto loan has a bigger impact on the total cost of your vehicle than most buyers realize. On a $30,000 loan over 60 months, the difference between a 5% rate and an 8% rate is nearly $2,500 in additional interest. Getting the best rate available to you is worth the effort. Here are five practical steps to help you do exactly that.

1. Boost Your Credit Score Before You Apply

Your credit score is the single most influential factor in determining your auto loan interest rate. Lenders use it to assess how likely you are to repay the loan, and the higher your score, the lower the rate you will typically qualify for.

If your score needs work before you apply, focus on three things. Pay every bill on time since payment history is the largest component of your score. Pay down existing balances to reduce your credit utilization ratio. And avoid opening new credit lines in the months before you apply since each new inquiry can temporarily lower your score.

PDCU members can use the credit score and score simulator tools inside the MyPDCU app to check their current score and model how specific financial actions might affect it before they apply. Learn more about improving your credit score.

2. Get Pre-Approved Before You Shop

Getting pre-approved for an auto loan before you visit a dealership is one of the most effective ways to secure a competitive rate. Pre-approval establishes your rate and loan amount in advance so you are not subject to whatever financing the dealer offers in the moment.

It also gives you real negotiating power. A buyer with pre-approved financing is essentially a cash buyer. Dealers take that seriously and are more likely to work with you on the vehicle price when they know the financing side is already settled.

Apply for PDCU pre-approval online and have your loan options ready before you start shopping.

3. Make a Larger Down Payment

A larger down payment reduces the amount you need to borrow, which lowers the lender’s risk and often results in a better rate. It also reduces your monthly payment and the total interest you pay over the life of the loan.

PDCU recommends a down payment of at least 10 to 20 percent of the vehicle’s purchase price if your budget allows. Even an additional $1,000 to $2,000 down can make a meaningful difference in the rate you qualify for and the total cost of the loan.

4. Choose a Shorter Loan Term

Longer loan terms lower your monthly payment but typically come with higher interest rates and significantly more interest paid over time. A 72-month loan at a higher rate can cost thousands more than a 48-month loan at a lower rate even if the monthly payment feels more manageable.

Choosing the shortest term your budget can support reduces your interest rate, builds equity in your vehicle faster, and gets you to a paid-off car sooner. PDCU offers flexible loan terms so you can find the balance between a payment that fits your budget and a term that minimizes your total cost.

5. Take Advantage of PDCU Member Discounts

As a member-owned credit union, PDCU returns value to members through lower rates and exclusive discounts that traditional banks do not offer.

AutoPay Discount: Enroll in AutoPay from your PDCU checking or savings account and your auto loan interest rate is reduced by 0.25 percent for the life of the loan. It also ensures you never miss a payment, which protects your credit score.

Member Promotions: Watch for seasonal rate specials and member-exclusive offers throughout the year that can help you lock in an even lower rate.

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Own the Road for 4.74%¹ APR*

Same low rate whether you’re buying new, used, or refinancing.

Drive off with payments as low as $18.75 per $1,000 borrowed^†

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*APR = Annual Percentage Rate. Rate available for qualified borrowers financing new or used cars, trucks, and SUVs, or refinancing an auto loan from another lender. Loan terms up to 72 months. All loans subject to credit approval and membership eligibility.
^†Example payment: $18.75 per $1,000 borrowed at 4.74% APR for 60 months.
Loans must close within 30 days of application. People Driven Credit Union is an equal opportunity lender.

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Improving your credit score, getting pre-approved, putting more down, choosing a shorter term, and taking advantage of member discounts are each individually valuable. Combined, they can substantially reduce what you pay for your next vehicle. Apply today or visit any of our five Michigan branch locations for personalized guidance.