If you’re buying a brand-new SUV or a reliable used sedan, the interest rate on your loan can significantly impact your monthly payments and the total cost of your vehicle. But here’s the good news, you don’t have to settle for a high rate. With a little preparation and know-how, you can secure the lowest interest rate possible. Here are 12 tips to help you do just that.

1: Check Your Credit Score

Your credit score is one of the most important factors lenders consider when determining your interest rate. The higher your score, the lower your rate is likely to be. Before you start shopping for a car, check your credit score and review your credit report for any errors.

If your score isn’t where you’d like it to be, take steps to improve it. Pay down existing debt, make all your payments on time, and avoid opening new credit accounts in the months leading up to your loan application. Even a small improvement in your score can lead to a lower interest rate.

2: Shop Around for Lenders

Don’t settle for the first loan offer you receive. Different lenders offer different rates, so it pays to shop around. Start with your bank or credit union, but also consider online lenders and dealership financing.

Comparing offers from multiple lenders can help you find the best rate. Be sure to look at the annual percentage rate (APR), which includes both the interest rate and any fees, to get a true picture of the loan’s cost.

3: Get Pre-Approved

Getting pre-approved for a loan before you visit the dealership can give you a significant advantage. Pre-approval not only helps you understand how much you can afford but also gives you leverage when negotiating with the dealer.

When you’re pre-approved, you’re essentially a cash buyer, which can make it easier to negotiate a better price on the car. Plus, you can compare the dealer’s financing offer with your pre-approved rate to ensure you’re getting the best deal.

4: Choose a Shorter Loan Term

While a longer loan term might lower your monthly payments, it usually comes with a higher interest rate. Choosing a shorter loan term can save you money in the long run by reducing the amount of interest you pay.

For example, a 36-month loan will typically have a lower interest rate than a 72-month loan. If you can afford the higher monthly payments, opting for a shorter term is a smart way to secure a lower rate.

5: Make a Larger Down Payment

A larger down payment reduces the amount you need to borrow, which can help you qualify for a lower interest rate. Lenders see a larger down payment as a sign that you’re financially stable and less of a risk.

Aim to put down at least 20% of the car’s purchase price. If you can afford to put down more, even better. Not only will this lower your interest rate, but it will also reduce your monthly payments and the total cost of the loan.

6: Consider a Co-Signer

If your credit score isn’t great, consider asking a family member or friend with good credit to co-sign your loan. A co-signer can help you qualify for a lower interest rate by reducing the lender’s risk.

Keep in mind that your co-signer is equally responsible for the loan, so make sure you can make the payments on time. Defaulting on the loan could damage both your credit and your co-signer’s credit.

7: Negotiate the Price of the Car

The price of the car directly affects the amount you need to borrow, which in turn affects your interest rate. Negotiating a lower price can help you secure a better rate and reduce the overall cost of the loan.

Do your research before visiting the dealership. Know the fair market value of the car you’re interested in and be prepared to negotiate. Don’t be afraid to walk away if the dealer isn’t willing to meet your price.

8: Avoid Add-Ons and Extras

Dealerships often try to sell you add-ons like extended warranties, gap insurance, and paint protection. While these extras might seem appealing, they can increase the total cost of your loan and result in a higher interest rate.

Stick to the essentials and avoid adding unnecessary costs to your loan. You can always purchase these extras later if you decide you need them.

9: Improve Your Debt-to-Income Ratio

Lenders look at your debt-to-income ratio (DTI) to determine your ability to repay the loan. A lower DTI can help you qualify for a lower interest rate.

To improve your DTI, pay down existing debt and avoid taking on new debt before applying for a car loan. This shows lenders that you’re financially responsible and less of a risk.

10: Time Your Purchase

Interest rates can fluctuate based on market conditions, so timing your purchase can make a difference. For example, rates are often lower at the end of the year when dealerships are trying to meet sales quotas.

Keep an eye on interest rate trends and consider waiting for a favorable time to buy. A little patience can save you a lot of money in the long run.

11: Consider Refinancing

If you’ve already taken out a car loan with a high interest rate, consider refinancing. Refinancing allows you to replace your existing loan with a new one at a lower rate, potentially saving you hundreds or even thousands of dollars.

Shop around for refinancing offers and compare them to your current loan. Be sure to factor in any fees associated with refinancing to ensure it’s worth it.

12: Read the Fine Print

Before signing on the dotted line, read the loan agreement carefully. Make sure you understand the terms, including the interest rate, loan term, and any fees.

Don’t be afraid to ask questions or negotiate terms. If something doesn’t seem right, walk away and find a better deal.

Securing the lowest interest rate on your auto loan requires a bit of effort, but the savings are well worth it. By following these tips, you can drive off the lot with confidence, knowing you’ve got the best possible deal.