If You’re Going to Buy a Car, Do It Now

Financing a car — especially if you have good credit — has never been this cheap. Don’t wait too long to take advantage of this, though. By this time next year, if not sooner, borrowing costs will be ticking up again.

Personal finance site WalletHub.com surveyed 157 lenders and consulted with experts in a new report about car loans. The average car on the road today is about 11 and a half years old, so maintenance and repair costs are likely to be mounting. More than half of the experts consulted for this study say interest rates are likely to rise within 12 months.

Right now, though, financing is dirt cheap. Among all financing sources, the average APR on a new car loan for someone with good credit is right around 3% for new cars and just over 3% for used cars. The picture is brightest for people with credit scores above 720. On average, these buyers can get away with paying less than $1,600 in financing charges over the life of a 5-year, $20,000 new car loan.

For a new car, if you go through the manufacturer, the average best rate is right around 2% for a new car and just under 5% for a used car. Nissan, Toyota and Chrysler offer the lowest rates for customers with high credit.

The average at credit unions is also under 3% for new car loans. (One note: While the study looks at each manufacturer’s APR for a 36-month loan term, most car buyers opt for 60-month loan terms, which tend to have slightly higher rates. These averages also assume the buyer has good credit.)

The best deals can often be found by financing directly through the dealerships, the study finds. On average, dealers are offering rates 35% below average.

The study also suggests credit unions as a good place to look for a car loan, with rates 25% below average). National banks offer average rates, while regional banks tend to be more expensive, with rates 40% above average. Still, your milage may vary, as the saying goes, so it’s a good idea to check out all your options.

It also pays to shop around if you plan to lease. Although the report finds that Nissan, Volvo and Infiniti offer the best lease rates, many car companies’ financing arms are still lacking in transparency when it comes to the actual APR you’re getting, so you don’t actually know if you’re getting the best rate unless you do some legwork before you get to the dealership.

Even people with fair credit can benefit from today’s super-low rates. The study finds that people with credit scores between 620 and 659 will pay an average of just over $7,000 over the life of the loan, a drop of nearly $500 over the past three months. Across all lending sources, the average APR for someone in this credit bracket is about 12.5% for a new car and just over 13% for a used car.

Since that’s a pretty sizable gap, if you’re thinking of buying a car this year, it might benefit you to take some steps to raise your credit score before you go shopping — you could effectively be saving more than $5,000 over the life of the loan.