In recent years, new and used car prices have been affected by increasing interest rates and inventory issues. However, there are indications that 2024 could be a more affordable year for vehicle purchases. According to a report from Experian, the average new vehicle loan amount decreased from 2022 to 2023 by nearly $1,400 and the average used vehicle loan amount decreased by about $1,500, indicating that the car market is stabilizing.
Greater Nevada Credit Union (GNCU) lending experts are providing tips for shoppers looking for the best auto loan available to them in the new year.
- First, review your credit score.
Credit scores dictate how much interest borrowers will pay over the term of a loan.
“Checking their credit score will help buyers know where they stand in terms of securing a vehicle loan before they shop for a car,” said Danielle Briggs, consumer lending sales manager for GNCU. “Many financial institutions, including GNCU, offer their members free credit reporting, which educates buyers on their current scores, allows borrowers to uncover any errors, and helps them identify where they can improve before getting pre-approved.”
- Get pre-approved for a loan before shopping.
Getting pre-approved for an auto loan shows buyers a rate, payment estimates, and a maximum loan amount ahead of time. This provides a realistic budget before car shopping. Having a budget can strengthen a buyer’s negotiating power—avoiding a common car dealer practice of focusing only on the desired monthly payment amount and extending a loan term to get there, which increases the interest paid. Pre-approved car buyers can focus on the vehicle’s out-the-door price, allowing people to focus on a budget that fits their needs. - Refinancing your auto loan is an option, too.
The Federal Reserve’s 2024 interest rate plans remain unclear, but one thing is certain: Car loans don’t have to be locked in forever at today’s rates. Even if rates rise, savvy car buyers have a powerful tool – refinancing.
If interest rates decrease in the future, buyers can usually refinance their existing car loan to secure a lower rate, likely resulting in smaller monthly payments and saving interest over the loan term. Refinancing can also help reduce monthly payment amounts by extending the repayment term, but more interest will likely be paid over the life of the loan. In either case, refinancing can be an attractive option to meet people’s needs. Buyers should check their statements to find their current interest rate and shop it with a few reputable lenders for refinancing options.
“Greater Nevada offers a wide variety of car loan options to make owning a vehicle accessible for people regardless of their circumstances,” said Marcus Wertz, chief lending officer for GNCU. “Whether they are purchasing their first car or their fifth, buying a vehicle is a significant purchase. We want to help people feel prepared and confident knowing what their financing options are so they can maintain, or even improve, their financial well-being before they hit the road.”
GNCU offers a free loan calculator online and financial education courses for car buyers researching loan options. GNCU members also have full access to My Credit Health, a free feature that provides access to their credit score, credit monitoring, credit score simulator, financial tips and more. For more information about GNCU’s auto loans, including first-time car buyer loans, credit rebuilder loans, and traditional auto loans, visit gncu.org/car-loans.
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