Searching for a new or used car? Before you begin, the smartest thing you can do is to take the time and look at all the factors of ways to reduce loan costs. No matter where you live, there are plenty of ways you can save money, you just have to take the time to do the research!
Nerdwallet makes it easy for you by already doing the work for you! In a study released last month, Victoria Simons, took data from Experian (credit agency) and NerdWallet that showcased loan trends at a state level. This includes average loan amounts, interest rates, and monthly payments. All states except Delaware, Oklahoma, Rhode Island, and Wyoming were included in the study. Sales tax wasn’t taken into account.
In conclusion, the study found that residents in the South are paying the most in financing costs while also taking out the longest-term loans.
Other key takeaways:
- “Loan costs are the result of multiple factors. A holistic approach is necessary to understand average loan rates and balances, especially at the state level. To understand why residents of some states pay more, you must consider the type of vehicle financed, its cost, the length of the loan, the interest rate and the credit history of the borrower. Louisiana residents have the highest average loan amounts, at $22,445. Michigan sees the lowest average figure at $15,959.
- Credit matters. The average used-vehicle loan interest rate is higher in Southern states, and credit is a big factor. Seven of the 10 states with the highest interest rates are in the South, including Mississippi, South Carolina, Alabama, Georgia, Florida, Louisiana and Texas. Mississippi is No. 1 at 11.47%.
- Longer loan terms are costlier. This is because you accrue interest over a longer period of time, and sometimes have to pay higher interest rates to get that longer term. Louisiana has both the highest average loan amount and loan term.”
So how can consumers save money on auto loans? HEAD TO YOUR NEAREST CREDIT UNION. It’ll save you time and money.
Borrowing from a credit union, as NerdWallet points out, will secure you with a lower rate than what is offered at a dealership or bank. Since credit unions are not for profit organizations they are able to offer more appealing rates that benefit you the consumer! You can bypass the pushy sales pitches at the dealership and bank when applying for an auto loan at a credit union. “According to The New York Times, the current average interest rate for a 36-month used-car loan is 3.25%. With credit unions, you may be able to qualify for rates at or around 2%. This results in a decent chunk of savings for you over the life of the loan.”
View the full article to learn more about this study and how well your state performed, below!
Used-car loans: southern states see higher interest rates