If you're thinking about buying a new car, the timing couldn't be much better than now. Interest rates on car loans are at a three-year low according to WalletHub, a website that provides credit advice. And it's the end of summer, a time when car dealers try to clear last year’s inventory from their lots.

The downside to buying now is that you may have fewer choices when it comes to certain options, like color and trim. Just make sure you aren't sacrificing any important safety features. The deals should be especially good this year because new-car sales (especially of small and midsized cars) are softening after five years of growth. 

Something to keep in mind is that if you buy a 2016 model now, it will effectively depreciate a year's worth immediately. So even if you're able to save money on the purchase price, that may be eclipsed by the fall in value of the car. But depreciation will matter less the longer you own the car.

Getting a good deal on a car is about more than how much you pay; it’s also about how you finance it. Almost 87 percent of new cars purchased in the last quarter were bought with loans, according to Experian, the credit-reporting agency. (Fifty-six percent of used-car purchases involved financing.) Consumers borrowed about $30,000, on average, to purchase a new car, with a monthly payment of about $500.

What to Consider

If you plan to buy a new car, follow these steps to make sure you’re getting the best possible deal on your car loan:

Shop around. As with any loan, only those people with pristine credit will get the lowest advertised rates. But even if your credit is average, there's a lot of variation in the rates. You’ll need to do some homework to make sure you nab the lowest one. Start by applying for a loan with a bank with which you do business (some offer discounted rates to customers), then get a quote from at least one other lender.

Once you have a few quotes, get preapproved for a loan before shopping for the car. “The most important thing is to look at your financing options before you even set foot on a lot,” says Chris Kukla, an executive vice president at the Center for Responsible Lending. “That will give you a lot more leverage going into the dealership.”

You may still get a better rate from the dealer, but at least you’ll have a baseline for negotiations. WalletHub found that rates from dealers were 51 percent below average and that rates at regional banks were, on average, 35 percent higher.

Stick with a shorter-term loan. As car prices have risen in recent years, the length of the typical car loan has been extended as well, with the average new-car loan now nearing seven years, according to Experian. If possible, look for a shorter-term car loan, ideally one that you can pay off in four years or less. “Consumers see what their monthly payments will be with a longer loan and they forget about all that extra interest that they’re going to be paying over the life of that loan,” says Jill Gonzalez, an auto analyst at WalletHub.

Plus having a longer-term loan means it will take you longer to build up equity in your car. That’s risky, because if it's stolen or totaled in an accident, your insurer will reimburse you only for the value of the car (not the value of the loan). And if that happens early in the life of the loan, the insurance payment may not be enough to cover your entire balance. You can buy gap insurance to cover the difference, but that's an additional cost.

Do the math on any rebate. Many dealers will offer buyers a rebate or a lower rate for purchasing a new car, and some of those deals can be pretty lucrative. “We are seeing an increase in incentive activity from dealers, especially as we get toward the end of the year and sales are softening,” says Michelle Krebs, a senior analyst for the website Autotrader.

Whether the rebate or the financing offer is the better choice depends on the terms of the offer and the price of the vehicle, so run the numbers on a calculator at the auto website Edmunds.com to make sure you’re getting the better deal.