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Captive Finance Companies: Tips for Good Auto Loan Rates
Customers looking to make deals with captive finance companies should know who they’re dealing with. These third-party lenders are among the most established auto loan lenders in the market. Their unique connections with vehicle manufacturers allow them to have a great amount of insight, not only into the products coming off of the factory line, but into the routine deals that will allow customers to drive off of the lots of participating dealerships. Here are some ways to get low car loan rates from these savvy car loan lenders.
1. Get Your House in Order
In any kind of lending situation, improving your credit score is a very necessary step in getting good auto loan rates. With captive finance companies, it’s even more so. A captive finance company is likely to offer boilerplate auto loans according to some very rigid metrics that the automaker has found to be profitable. Where smaller lenders may let higher credit ratings slide, captive finance companies are often very methodical about protecting their investments in consumer debt. Get a copy of your credit report, and if it is under 600, or the threshold that you have found lenders are desiring, take steps to improve it for better auto loan rates and terms.
2. Show Proof of Income and Other Positives
Along with a good credit history, the captive finance company likes to see either proof of high income or significant assets for an individual or household. These extra details show an ability to pay on a loan, and help to assure these established and by-the-book lenders that you are not a major credit risk.
3. Look at Loan and Lease Options
Many captive finance companies include a “menu” of options for drivers to choose from. After all, their goal is to get customers into the vehicles made by their affiliate. For instance, the General Motors captive finance company known as GMAC offers a variety of SmartBuy and SmartLease programs, and even a kind of hybrid option, so that customers can tailor their rentals or purchases to their specific household budgets. Looking carefully at these different deals can help you get access to a vehicle without sky-high interest rates.
4. Offer a Down Payment
In most lending deals, and particularly with finance companies, it makes sense to offer a down payment and look at how this affects your bottom line, not only in interest rates, but in what you qualify for. A captive finance company may be slow to approve a 100% financing deal, but for a customer who can come up with half of the price of a vehicle up front, many doors will be wide open, and interest rates are likely to decrease.
These are some of the general rules for getting better interest rates from companies that were set up specifically to make deals with customers of a specific auto maker. Looking at these kinds of loans at the outset will help ensure hassle-free communications with your lender throughout the term of your loan.
