1 Way To Potentially Save Thousands on a New Car

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With President Donald Trump’s announcement of a 25% tariff on imported auto parts and cars, car prices will likely jump soon. This isn’t great news if you’re in the market for a new car. However, there is one way that you can save big on your next vehicle.

Here’s what you need to know.

How To Save Big on a Car

It’s not very common for buyers to pay for a new or used car upfront. Most people need to finance it, which means taking out an auto loan and paying off the car in installments with interest. If you’ve got a low credit score, you’re going to pay more in interest for that car over time. No matter the car’s price, a higher credit score will mean paying less monthly interest on your auto loan, which will save you thousands over time. 

The credit agency Experian gave an example of how this works. If you’re buying a new car, here’s how lower credit scores begin to affect your monthly payments:

• 781+: 5.08% APR, resulting in $723 per month
• 661 to 780: 6.70% APR, resulting in $744 per month
• 601 to 660: 9.73% APR, resulting in $767 per month

In this example, the difference between credit scores of 781 and 601 means an extra $44 a month. If your car loan lasts 72 months, you’ll be paying $3,168 more just for a lower credit score.

Boosting Your Credit Score

Getting a better credit score will mean paying less interest over time and, in turn, less for your vehicle. There are different ways that you can boost your credit score, some taking longer than others. Here are a few:

Get Out of Debt

While this may not be a short-term option for everyone, if you’re able to quickly pay down your credit card and loan balances, you’ll see a jump in your credit score. You might not be able to pay off all of your debt at once, but by viewing your credit report, you can see the key factors affecting your score. Some of these may relate to specific accounts or types of debt, and paying those debts first will help you score the most.

Increase Your Credit Limit

One of the factors that plays a part in your credit score is your credit utilization ratio. This measures how much of your available credit you’re using. Asking for an increase in available credit without adding more debt will give you a lower ratio and a better credit score. Keep in mind that a credit increase will likely mean you’ll get a hard or soft credit inquiry. While one or two soft credit inquiries won’t have a detrimental effect on your credit score, multiple hard inquiries can temporarily drop it by a few points.

Make Consistent Monthly Payments

Trust is a very important factor when taking out a loan. One way to build trust with lenders is to prove that you will pay back what you owe on time. Because of this, your payment history accounts for 35% of your credit score. Making your monthly payments on time and never having a late or missed payment can greatly improve your score over time.

Fix Errors on Your Credit Report

Just because your credit report says something doesn’t mean it’s correct. Mistakes happen, and if you don’t dispute these errors, lenders will penalize you for them. First of all, it’s important to regularly check your credit report to familiarize yourself with what’s on it. If you spot something that’s off, you can contact one of the credit reporting agencies (Equifax, Experian or Transunion) and explain the issue in writing. Be sure to include documents to support your case.

Focusing on your credit score can help you get better financing with lower interest. Even if tariffs drive up auto prices, you’ll still be able to save thousands with this approach.

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