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How Fixing Your Credit Score Can Save You $8,500

If you're like most car buyers, you'll be taking out a car loan to pay for your purchase.

Did you know that your credit score can be the most expensive cost factor when buying a car?

The difference in cost between an excellent credit score and a poor credit score on a 60-month car loan is nearly $8,500!

Most car shoppers spend the majority of their time trying to negotiate the price of the car and spend hardly any time trying to improve their credit score.

This is fine if you have an excellent credit score, but if you have bad credit, you should focus nearly all of your time on fixing your credit score.

Let's take a look at the interest rates you can qualify for with different credit scores.

The following is for a $20,000 car loan with a 60-month term:

Credit Score Interest Rate Monthly Payment Total Interest Cost
720-850 4.75% $375 $2,520
690-719 6.25% $389 $3,356
660-689 8.15% $407 $4,423
620-659 11.80% $443 $6,575
590-619 17.72% $505 $10,294
500-589 18.75% $516 $10,984

As you can see, someone with a credit score ranging from 720 to 850 can expect to pay only $2,520 in interest over the life of the loan.

Someone with a credit score below 589 can expect to pay 4 times more: $10,984!

These are seriously large differences in cost and hopefully you now realize how important your credit score is when getting auto financing.

Your first step is knowing what your own credit score is. You can check it at FreeCreditScore.com

3 Steps Every Car Buyer Needs to Take to Save Maximum Money

The key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:

Step 1 Get Prices From My Trusted Network

Select the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Select Vehicle to Get Local Pricing

Step 2 Get Prices From TrueCar / CarsDirect

TrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.

Step 3 Complete my Checklist

Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

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About The Author

Gregg Fidan Gregg Fidan is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.
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