Saving money on your auto loan is a skill like any other. With a little training, you can learn to hack the loan-shopping process with ease and avoid overpaying for your loan.

Jerry

, we believe that every driver can be a car loan expert. That’s why we created this guide to the best ways to save money while shopping for auto loans. We’ll cover the best practices for auto loan shopping as well as some common red flags to look out for in the loan process.

How to shop for an auto loan (the right way)

When it’s time to shop for an auto loan, don’t just take the first offer that comes your way from the dealership or bank. Follow

Jerry’s

ultimate auto loan shopping checklist to get the best deal on your car loan.

1. Check your credit score—and be prepared to build your credit

You’ve heard it before: your credit score is the most important number when it comes to getting an auto loan. Regardless of income, loan amount, or repayment term, your credit score sets the terms of your loan.

Start the loan shopping process by checking your score. If it’s 661 or higher, you’re in good shape to get an interest rate that’s close to the national average of 3.64%.

If your score is above 780, you’ll be eligible for the absolute lowest interest rates—and even 0% APR financing from some lenders!

If your credit’s not in great shape, you still have options. Buying a used car, making a large down payment, or getting a co-signer for your loan can all improve your approval odds. But if your score is below 629, your interest rate will climb. If it’s less than 500, you may have a difficult time getting a loan at all.

Take stock of your situation and consider whether it’s worth building your credit before buying. If you’re close to the next credit bracket, waiting a few months to improve your credit score could pay off in a big way when you do shop for auto loans.

MORE: Does paying car insurance help build credit?

2. Compare at least three loan offers

Never take the first loan offer you see. Because every lender calculates your APR, interest rate, and fees differently, it’s worth comparing offers from at least three different lenders before making a final call.

Your options for a car loan basically come down to three different types of lenders:

Bank: Your bank will give you a loan for a new car purchase, and your odds of approval and low rates may be better if you’ve been with the bank for some time. However, a loan from a bank may not be an option if you’re looking for a small loan amount (e.g., for a used car).

Credit union: A car loan from a credit union can give you a lower interest rate (typically 1-2% lower than other lenders), along with better approval chances and more authority over your loan. But you’ll have to join the credit union before you can qualify for a loan.

Dealership: Most car dealerships offer auto financing, but they act as middlemen between you and a financial institution rather than actually making the loan themselves. This means you’ll pay extra for the convenience of financing your car through the dealership.

Take all your needs into account—from budget and convenience to customer service—when comparing offers from lenders. If one lender offers the lowest price but is highly unresponsive or abrasive in communication with you, it could be worth paying a little extra each month to a lender you’re confident will listen to your concerns.

If you’re overwhelmed by the idea of comparing multiple loan offers, don’t worry!

Jerry

makes the loan comparison process as simple as sending a text. Just download the app, enter your information, and wait a few seconds to see all your best loan options.

3. Get preapproved before you head to the dealership

Always get preapproved for an auto loan before you set foot on the dealer’s lot. Why? Simply put, loan preapproval puts you in a position of power when it comes to negotiations at the dealership.

Buying a car means working with salesmen who are trained to talk you into options and add-ons that drive up your final purchase price. If you show up with just a general idea of your finances, it’s easy to get sucked into a deal you can’t afford—after all, those safety features sound pretty important and the upgraded sound system just looks so awesome!

But if you’ve got your loan preapproval in hand, you’ll be working with hard numbers that can help you calculate more accurately exactly what you can (and can’t) afford. Getting preapproved means you can splurge with confidence and save with intelligence at the dealership.

MORE: How to negotiate with a car salesperson

4. Know what’s negotiable

When it comes time to sign the loan agreement, make sure you’ve got the best deal. The following elements of your loan are negotiable:

APR and interest rate

Loan repayment term

Prepayment penalties

Additional fees

That’s right—your APR isn’t set in stone based on your credit score! You can (and should!) negotiate the lowest APR and loan term you can. Avoid unnecessary add-ons like extended warranties unless there’s a compelling reason to take them.

5. Make a big down payment

Making a sizable down payment is the best way to lower your overall auto loan costs. The bigger your down payment, the less interest you’ll have to pay. You’ll also put yourself in a good position to negotiate a lower interest rate and shorter repayment term.

And just like that, you’re getting the best deal on your auto loan! Once the paperwork is signed and you’re driving away in your new ride, it’s time to shop for a new car insurance policy with

Jerry

. Just 45 seconds on the app could save you an average of $600 a year on car insurance—enough to free up your finances for your new car payment!

MORE: How to save money when you buy a car

“
Jerry
really just saved me $954 on my new car insurance payment. I’m feeling great!” —Irene M.

6. What to watch out for when signing up for an auto loan

When you’re shopping for an auto loan, you want to believe that you’re getting a fair deal from lenders. Unfortunately, some lenders will count on your lack of expertise to talk you into a more expensive loan. In extreme cases, your lender may even bend the law to get more money out of you.

Go into the loan shopping process armed with knowledge. The following tips can help you recognize any red flags before you sign.

7. Avoid unnecessary add-ons

Auto loans seem simple when you’re just looking at the loan amount, interest rate, and down payment. But when you get into the weeds of vehicle upgrades, extended warranties, and credit insurance, the costs of your loan can start to add up quickly.

Consider your options carefully and don’t just agree to optional add-ons because they’re offered. For instance, an extended warranty could be a good decision if you’ve got no other coverage on an expensive vehicle, but mechanical breakdown insurance is typically a more affordable option that gives you the same protection.

8. Learn about your state’s APR cap

Most states set a cap on the maximum APR banks may set based on loan amount. The median APR cap for a 5-year $10,000 loan is 25%, but the exact number depends on your location and the location of your lender. Use this fact sheet from the National Consumer Law Center to check your state’s APR caps.

Keep in mind that your lender may not be based in the same state where you’re shopping for loans. If you live in North Carolina and get a loan from a bank headquartered in California, the California APR cap will apply.

9. Read the paperwork before you sign

It should go without saying, but you should always review your loan paperwork carefully before you sign anything. Remember those optional add-ons that tend to sneak into your loan agreement? This is your chance to catch any of those loose ends.

Check the APR, finance charge, loan amount, total of payments, and total purchase price to verify that you’re not paying for anything you didn’t agree to. Never drive your car away before your loan agreement is complete.

10. Walk away if you’re not comfortable

If you catch any inconsistencies during the loan process or just get a bad feeling from your communication with the lender, walk away. It’s better to spend a little more time finding the right lender than to resign yourself to a shady deal that could cost you thousands of dollars.

“I wasn’t comfortable signing onto an otherwise cheap policy because the provider would track my miles, so
Jerry
found me a non-tracking policy with Clearcover for only $61/month! I think I made the right choice going with Clearcover. Thanks for helping my peace of mind, Jerry.” —Jorge C

How to find the best auto loan deals

Luckily, finding the right lender can be as easy as sending a text with

Jerry

. When you download the Jerry app and enter your information, you’ll get loan offers in 45 seconds—and you can shop for car insurance savings at the same time!

With an average annual savings of $1,823, refinancing your auto loan could free up your finances even more.