Don't Forget, You Can Shop Around for Car Loans
When they step foot in a dealership, car shoppers generally focus on haggling the best price. But don't forget: car loans are shoppable, too .
If you're going to finance your car rather than buy it outright, it's easy to assume you have to go with the dealer's financing. But as a recent study suggests, it's important to shop around.
The study was co-authored by professors at the MIT Sloan School of Management and the Brigham Young University's Marriott School of Business. They looked at data on over 4 million car loans from 326 different financial institutions across the U.S. According to the press release, there are a few interesting findings:
"Search frictions"-including the time and hassle of researching and applying for alternative financing options-make it much less likely consumers will get the best interest rate for their credit profile.
Less than 20 percent of borrowers in the study's sample successfully originated an auto loan with the lowest available interest rate...
Most borrowers would only need three interest-rate quotes to get close to the best rate.
As Professor Christopher Palmer of MIT pointed out, "Consumers often fail to shop around for lower interest rates. It can be a costly choice -small differences in monthly payments really add up, and many people find they can afford a newer car when they secure a better rate."
Next time you're in the market for a car, let this serve as a reminder: shop around. Check auto loan terms at local bank and credit union branches. It takes a little extra time to get a few quotes, but the