Qualify for the best rates
McBride says the lowest loan rates go to people who put at least 10% down on new cars or 20% down for used cars. You also need around a 700 "FICO score," a credit score calculated using software from a firm called Fair Isaac (FICO - Get Report).
Fortunately, a 700 FICO score isn't actually that hard to get -- in fact, it's slightly below the U.S. median of 711.
That said, checking your score is a bit involved because government-mandated free credit reports won't include it. You can either apply for a loan and ask the lender to tell your score or buy access to it yourself for around $20 from Equifax.com or MyFico.com.
If you don't have a good enough score or down payment, consider holding off on a car purchase until your finances improve.Line up a loan in advance
Getting pre-approved for a loan through a bank or credit union will maximize your leverage with dealers, who will typically offer you financing themselves. Without pre-approval, a dealer might offer you a loan only if you agree to buy a specific car or accept a longer repayment term than you want.
Conversely, come in with a loan already lined up and the dealer might beat the offer you already have. Shop for the best rates
Large banks such as CapitalOne (COF) have made a big push into online car loans, while local banks and credit unions want your business as well. So McBride recommends checking with several lenders to find the best deals. His site features a search engine that updates hundreds of car-loan rates daily. Don't get more than a five-year loan
Lenders and dealers typically offer car loans with terms as long as seven years, but McBride recommends skipping anything longer than 60 months. "If you can't afford the payments on a five-year loan, you need to find a less-expensive car," he says.