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Shopping for an Auto Loan:
How to Get the Best Deal
by Lisa Phillips
March 2008
How to Get the Best Deal
by Lisa Phillips
March 2008
Shopping for an automobile can be stressful. You can make it a little easier
on yourself by shopping for your financing before you shop for the car. Most
consumers know the make, model and color of the vehicle they want.
What consumers usually lack is knowledge on how to finance an auto or how
to get the best deal on a car loan. Here are few tips to secure the best deal
for the car of your dreams.
on yourself by shopping for your financing before you shop for the car. Most
consumers know the make, model and color of the vehicle they want.
What consumers usually lack is knowledge on how to finance an auto or how
to get the best deal on a car loan. Here are few tips to secure the best deal
for the car of your dreams.
Before you look for financing. You want to know exactly what you are
dealing with before any lender pulls your credit. Any mistakes, errors or
outdated information should be disputed. You want your credit report to
reflect as much positive information as possible. Be prepared to explain
any recent negative information such as late payments or public records
like bankruptcies.
Window shop online
Before you enter any dealership be absolutely sure of the make, model
and even color of the car you desire. Salespeople can be very
persuasive, you do not want to end up regretting a major purchase such
as an automobile. Shopping online before you enter a dealership can
help you familiarize yourself with a fair price of the car you desire. There
are many resources online that will give you a precise idea of what
different dealers are asking for their inventory.
Window shop in person
In order really get a feel of the car you want, it is best to go out and take
a test drive. Do not allow the salesperson to talk your ear off during or
after your test drive. Some dealers will allow you to take the car out alone
and this is great because you can resist the small talk and the play on
your emotional response to the vehicle. Do not feel pressured to buy the
car on your first visit to the dealership. Resist the temptation. The
salespeople will know you are not desperate and will be more likely to
offer you a great deal that may save you thousands of dollars.
Financial Institutions
When purchasing a vehicle start looking for financing at your bank or
credit union. Financial institutions can often offer the best interest rates,
especially if you are a long term customer. Banks like to form total
relationships with consumers. That means checking, savings, mortgage,
auto loan, credit card and possibly even retirement accounts. You may
find the most favorable deal at your local bank and often, you can
request automatic deduction of your auto loan and the bank will lower the
interest rate.
Never pay dealer’s price
If you do not like negotiating, take someone with you who does. You can
save as much as 10-12 percent off the asking price if you are willing to
negotiate. It does not have to take all day. Never allow a salesperson to
keep you isolated in a little cubicle filling you up with beverages while
they go and consult with the “Wizard”, oh, I mean finance manager. Know
your bottom line and keep in mind a car dealer’s initial offer can be
marked up as much as 20 percent above the sticker price. Knowing this
can give you a lot of wiggle room to negotiate a fair asking price.
Monthly payment vs. Cost of car
Car dealers like to focus negotiations around the monthly payment of a
car. Don’t even answer the question if a salesperson asks you “how
much can you afford to pay monthly”. Refocus the attention towards the
cost of the car and the interest rate, if you choose dealer financing.
Utilize the online loan calculators to determine what you want to pay
according to the interest rate. Remember, the interest rate and cost of
the car determines the monthly payment. If you have secured financing
before you visit a dealership you can avoid all talk of financing and just
negotiate a fair price for the vehicle.
Review all documents and paperwork
Review final paperwork before signing any contract. Be certain that all
negotiations agreed upon are in the final contract. Check the price of the
car, interest rate and loan term. Check the fees and costs and do not
feel pressured into purchasing extra features, such as gap insurance
and extended warranties.
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