A good loan is the first step in a solid car deal. Sadly, buyers in a rush don’t shop around for the best loan. If you put your new car ahead of your financing, you could wind up paying hundreds or thousands of dollars too much in interest.
First, Shop around for Loans
Shopping for the best auto loan is a kinda like car shopping itself: Let market competition get you the best deal. Banks should compete for you.
- Check your credit score and report. Dispute any errors in your credit report. Use Credit Karma or Credit Sesame (both are free).
- Apply for a pre approved loan with at least three lenders. This counts as one hard credit inquiry if done within a short period, generally 14 to 45 days. Try local banks or banks where you have funds. Some local banks have a reputation as offering great financing deals.
- Use an auto loan calculator to estimate your payment, then compare offers so you can find the best rate and terms. Take into account taxes and title which are usually around 10% of the car price.
Getting pre approved not only shows you what interest rate you qualify for, but also serves as protection during negotiations.
At the dealership, the salesperson will likely ask what you want to pay per month. This makes it easy to hide the total price you’d pay for the car. Use the above-mentioned car calculator to determine the TOTAL amount of money paid for a car. With a pre approved loan offer, you can say you’re a cash buyer and that you want to negotiate the price of the car.
Now, the fun part — get an even better rate: Once the purchase price is set, let the finance manager try to beat your best loan offer with dealership financing. Dealers have access to loans from the automakers’ finance companies that can undercut other lenders. Just make sure the term of the loan — the number of months you have to pay it off — is the same as your pre approved offer. If the manager is unwilling to meet or beat your price, be ready to walk away.
Most of this negotiating can take place over the internet now. This avoids any time-wasting on your part or the car dealership. Do your research and save yourself time and money. Throw those savings into an investment account and use that money for your next car.
Stay Rational
-B&T