Finding an Auto Loan

When looking for a vehicle loan, you may wish to start with your current lender. It is probably the most familiar with your loan-repayment history. It may also already have pre-approved you for a consumer loan, which can be used to finance most vehicle purchases.

Banks, credit unions or other financial institutions seek to acquire a total banking relationship with you, from holding your savings, checking and retirement accounts to being your mortgage, credit card and auto lender. If you already have your banking relationship consolidated at one institution, you are likely to find it to offer very good loan terms.

On the other hand, you may find that your auto dealer has financing available from the lending subsidiaries of the automakers it sells. (General Motors Acceptance Corp. and Ford Motor Credit Corp. are two examples of these "captive" lenders.)

Captive lenders spearheaded new-vehicle sales in 2006 through their aggressive offers of zero-percent financing. As a result, new-vehicle sales for the year had one of their best years ever with sales of about 16.5 million vehicles.

Another vehicle-financing option is to use a home equity loan or line of credit. Because the interest expense on most home equity loans is tax-deductible, it may be hard to find a cheaper source of loan financing. (Not everyone can qualify for zero-percent financing.)