The 7 Essential Tips for Financing a Car

When you’re financing a car, maximize your savings by paying at least 20% down and opting for a shorter loan term.
Written by R.E. Fulton
Reviewed by Jessica Barrett
Updated on Dec 13, 2022
If you’re considering a new car purchase, you can maximize your auto loan savings by researching loans, getting quotes in advance, paying at least 20% down, and opting for the shortest loan term you can afford. 
When you apply for a
car loan
to finance your car, there are a ton of factors to consider. How long should your loan term be? What kind of down payment should you make? And how will your credit score affect it all? 
Lenders and dealers can take advantage of you if you’re not familiar with the process, so it’s important to approach auto financing armed with an understanding of the best practices for buyers.   
Car insurance
comparison and broker app
understands how daunting it can be to negotiate a car loan. We’ve compiled a simple list of auto loan financing tips to help you navigate the financing process with confidence. 
You can use Jerry’s tips to finance your car and download the app to find great savings on car insurance for your new ride! 
Here are Jerry’s seven essential tips for financing a car the smart way. 

1. Do your research before you head to the bank

Start smart by researching the car you’re interested in and the institution you plan to borrow from. 
Resources like
Kelley Blue Book
can help you determine the value of the car you want to buy and help you avoid taking out a loan that’s bigger than you need
Research when interest rates are lowest from the bank or other financial institution you plan to borrow from. Interest isn’t a fixed calculation; average rates can go up or down in response to economic conditions. 
If possible, it’s a good idea to get quotes at different times of the year so that you can determine the best timing for your auto loan. 

2. Understand your credit score

Check your credit score before you finance a car. Loan experts agree that
a good credit score to buy a car
is anything at or above 658. If your score is below 629, you’ll have to pay a higher interest rate, and if it’s below 550, you may have trouble getting a loan. 
If your credit score is very low, your best bet is to wait and
improve your credit score
before financing a car. However, even individuals with less than perfect credit can get approved for auto loans.

Strategies for getting an auto loan with poor credit

If you’re determined to go forward with auto financing with a credit score that’s lower than average, here are a few tips for financing a car with less than ideal (or no) credit: 
  • If your credit score is below 550, you can
    get a co-signer for a bad credit car loan
  • Get preapproved for a loan from your bank or a credit union, dealership, or finance company. 
  • Check that your credit report is accurate and handle any misassigned debt.

3. Get financing quotes in advance (or get preapproved!)

Don’t just take the first quote your bank gives you. Shop around for a car loan by getting quotes in advance from a number of institutions. Look at other banks, credit unions, car dealerships, and compare the following factors: 
  • How much they’re willing to loan you
  • How long the loan term is
  • How low their interest rates are
It’s a good idea to get preapproved for a loan before you head to the dealership. Preapproval is a valuable bargaining chip that can help you dodge bad offers from greedy dealerships and negotiate a lower interest rate. 
Key Takeaway: Comparing financing quotes puts you in a position of power when it comes to choosing a loan. 
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4. Keep loan negotiations simple

Auto financing involves a lot of moving parts. Your interest rate, loan term, prepayment penalty, and fees are all negotiable, but they can all be affected by things like available add-ons you choose at the dealership. 
To make your job easier, keep it simple by avoiding unnecessary add-ons and uncertain deals. Turn down any offer you’re not sure about. You can always negotiate a loan elsewhere—there are tons of options!  

5. Pay at least 20% down

A good rule of thumb for calculating your down payment is to pay at least 20% down. This has two advantages: it keeps your loan term shorter and it reduces the amount that you’ll pay in interest. If you can afford a higher down payment, you’ll increase your savings for the remainder of the loan term. 
It’s also smart to pay any taxes, fees, and other additional charges in cash. If you don’t, they’ll be lumped into the rest of your loan and you’ll end up paying extra interest on those fees. 
Key Takeaway: Choosing a bigger down payment will reduce the amount of interest you pay and help you keep your loan term short. 

6. Keep your loan term as short as possible

The most common auto loan term is 72 months, or six years. But lately, loan terms have been stretching out as long as 84 or even 96 months. That means you could be paying off your car for as long as eight years!
Avoid a long loan term. The shorter the term, the less you’ll pay in interest, making the loan more affordable over time. However, a shorter loan term will come with higher monthly payments, so you’ll have to calculate what’s possible for your budget. 
Aim for your loan payment to be no more than 10 to 15% of your monthly take-home income. Ideally, you should look for a loan that allows you to pay off the car in 60 months or less without going over that benchmark. 

7. Buy full-coverage insurance

No matter what loan term, interest rate, and down payment you land on, most lenders will require you to purchase full-coverage car insurance for the duration of the loan. Typically, this includes the following coverage: 
Failure to buy full-coverage insurance could result in your lender buying an expensive policy on your behalf, or even canceling your loan. Don’t risk it—shop for insurance while you’re negotiating the terms of your loan.

How to save on car insurance for a financed car

car insurance
is the last step to smart auto financing. At this point, you’re probably tired of researching, comparing rates, and negotiating deals. 
Good news: downloading the
app is the fastest, easiest way to save with confidence on car insurance. As a licensed insurance broker, Jerry will search for rates from 50+ top companies, compare them for you, and instantly show you the best quotes for your car and budget. 
Once you’ve chosen the rate that works for you, Jerry will handle all the paperwork to set you up with savings. Jerry users save an average of $879 a year on car insurance, and you’ll never have to spend an afternoon filling out forms and sitting on hold!  
“After I bought my new car, the insurance companies tried charging me $315/month.
, on the other hand, found me full coverage for only $220/month. Thank you!” —Mari E.
Haven’t shopped for insurance in the last six months? There might be hundreds $$$ in savings waiting for you.
Judith switched to Progressive
icon savingsSaved $725 annually
Alexander switched to Travelers
icon savingsSaved $834 annually
Annie switched to Nationwide
icon savingsSaved $668 annually


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