There are a few things in life more exciting than purchasing a car. Whether it is your first car at age 16, a new car when you are older, or the car of your dreams, it is a great feeling to drive off the lot in a new car. If only the process of purchasing a new car was as exciting as dreaming about which car you want to buy. Trying to work with dealers to secure financing can be a tremendous headache; after all it is in the best interest of the dealer to get you into a financing plan that benefits them more than it does you. However, with a little research beforehand anyone can find the best deal for their situation and walk away with the car of their dreams.

The driving force behind any financing plan is going to be car loan interest rates. These rates will determine how much the monthly payment will be and can have a great impact on an individual’s ability to purchase the car they want. So what are the major factors that play into car loan interest rates?

A number of factors will play into the car loan interest rate offered to borrowers during the car buying process, but the most important factors are the borrower’s credit score and to a lesser degree the Federal Funds rate.

An individual’s credit score is going to play a role in the car loan interest rate they are offered during the car buying process. Individuals with a great or good credit score can feel secure in the knowledge that they will likely be offered the best interest rate possible. Even those with a less than stellar credit score could still be offered lower car loan interest rates, assuming there are no red flags on their credit report.

The role of an individual’s credit score in determining the car loan interest rate they are offered is pivotal because it gives consumers a chance to control the rate they receive. Those who research before they buy should also order a free copy of their credit report so they know where they stand. This gives them to opportunity to clear up inaccuracies on their report and work to repair their score a little before they make the decision to buy.

Changes in the Federal Funds rate can have an impact on car loan interest rates, but the impact of this rate is often minimal. The biggest impact the Federal Fund rate has on car loan interest rates is seen in shorter term loan rates.

Car loan interest rates are largely determined by the cost to the lender of acquiring funds to loan to borrowers. A lot of the funds used in the financing of cars are gathered through local funds and deposits, which is why the Federal Funds rate often has little impact on the interest rate borrowers pay.

The current economic recession initially led to tighter purse strings at banks around the country, with the federal government reacting by lowering rates across the board to encourage lending and spending. This initially lowered rates tremendously, but as banks rebounded and started lending more there was a leveling out of rates. The current average car loan interest rates for new and used cars are:

• Between 4.7% and 6.94% for a $20,000 fixed rate loan to a borrower with good credit buying a new car
• Between 5.24% and 8.52% for a $20,000 fixed rate loan to a borrower with good credit buying a used car

Interest rates can vary from lender to lender, and region to region so the rates offered in any one area can differ greatly from those in another region of the country.

For help obtaining the best car loan interest rates, pay a visit to Cheapcarloan.com. Here you will find an online application for a car loan that can be completed in minutes and be approved by credible lenders in just 24 hours, all from the comfort of your computer!