My wife and I bought a new car about a year ago, and the one and only thing that bothers me still about the purchase is how we handled the financing. I love my bank. I have a great one that I have been a customer with since college, and my bank did not take one penny of TARP funds either. So, I usually give them almost all of my business. I ask for a new car loan from them and was quickly approved. When I took my cashier’s check to the dealership after agreeing on a car and a price, they offered me a better interest rate on the loan. I took it on the spot. Later, I thought about it. I wish I had given my bank a chance to match or beat the interest rate. I bet they would have in order to keep my business.
Pick Your Lender. If you are in the market for a new or used car (new to you as I like to say) but must obtain financing, then you will need to do a little comparison shopping in order to find a loan at a great interest rate. As you can see from my example above, it is not always wise to accept the first loan offer than comes your way. Do your homework first so you will receive the best rate for your new automobile. In today’s economy, you have a good opportunity of striking a good deal if you stick to your guns to find a lender who will give you a loan amount at a rate you can afford to pay. It is currently a buyer’s market so you are free to take your time and accept or refuse any lender’s offer. Gather a number of loan offers and compare them with respect to their terms, fees and interest rates. Going online too will give you more latitude in this regard. Do not forget to compare like loans with similar terms with each other, apples to apples.
Check Your Credit. Before you consider talking to a lender though, make sure to check your credit report for errors. Knowing your credit score before you begin negotiations will help you negotiate for a loan with a lower rate of interest. It will be easier for you to bargain knowing more information that you have about your situation. You can find out your FICO credit score, the one all the banks and lenders use, and purchase copies of your credit reports at MyFico.com. If you have some problems with your credit score, then you may not be in the best position to go forward with any type of loan. It may be best to see what needs to be improved and then plan on reapplying when your credit score is higher. The fastest way to raise your score is to make all your payments on time. The higher your credit score, the lower the interest will be on your car loan. Waiting to get a loan when your score is higher will give you some leverage when applying for a loan.
Down Payment. If you want to get the best rate on a car loan, then you should try and save a little money for a down payment too. You should shoot for a down payment of 10% to 20%. That will give you a smaller monthly payment as well as one of the best possible interest rates on your loan.
Make Sure You Are Prepared. As stated, you should also have a down payment when you negotiate for a loan. Don’t trade your current vehicle in but try selling it yourself. In most cases, you will receive more money than you would for a trade and be able to affect a better loan too. Also, make certain that you have the financing arranged before you walk into a car dealer’s door. The dealership may be able to offer you a reasonable loan, but, in the majority of cases, it is a better negotiating tactic if you have already secured the money you need for your vehicle through a financial institution before talking about price. One thing to remember is that buying a car at a dealership is like a balloon. The dealer is going to make a profit somehow. That is why he is in business. He is not just going to give cars away for cost no matter what the slick television commercials say. Without financing in place and your old car already sold before you get to the car lot, you are at a negotiating disadvantage. If you get a good deal on the actual car, you may lose on the trade in or the financing. Squeeze the balloon somewhere will create a bulge elsewhere.
Stay On Track. When you finally start negotiating for a particular car, do not let the dealer convince you to include items you had not counted on adding or sell you a model that is more expensive than what you had initially planned to buy. Just stay on track so you can get the best deal for your money. Do not let the dealer lead you down any other path than the course you originally planned to take.
Buying a car, whether it is used or brand new off the showroom floor, is a nerve-racking and trying experience for even the most astute negotiators. But, each time we buy a car we learn from the experience. And, each time one of our friends (or favorite bloggers) does it we learn as well. My boss loves to say, “The best lessons learned are the ones you do not have to pay for.” Learning from other people’s mistakes (and triumphs) is a thing of beauty and what makes blogging great.
Do you have any tips I missed? Leave a comment….