Everyone has at least one entertaining story about buying a car. What most people miss in all the back and forth at the dealer’s table is the fact they might have a choice of 100 cars, but the cost of that vehicle is going to be determined by a choice of about three auto loans.
Those loans are likely to be massively overpriced, include all kinds of unfavorable boilerplate terms and make it as difficult as possible to escape without paying penalties. Car buyers are likely to walk right in to these deals not knowing they might be adding thousands to the price of their car.
If you plan on getting out of that line and into a better loan, here are some things to consider.
The best place to get a car loan is four months before you start looking and 100 miles from the lot where you and your bank representative or credit union manager can sit down and figure out the best terms for your purchase. Then you can walk right into the dealership knowing exactly how much you will be spending and also knowing you won’t have to worry about the back and forth negotiations.
Instead of relying on the dealership to get your credit score for you, obtain your report from the credit reporting agencies and bring your own paperwork. Make sure you have copies of your tax returns to demonstrate your income. Make sure you have all the necessary paperwork for your existing vehicle so if you decide to do a trade-in you won’t have to take extra days to make several trips. If the dealership doesn’t accept your credit score and insists on substituting their own, find a better dealer.
Get as close as you can to paying off the car as possible with your down payment. This will have an instant benefit to your bottom line as it will dramatically reduce the interest you have to pay. It will also potentially reduce the term of your loan which may entitle you to even more favorable concessions from both the dealer and the finance company.
Two Years Older
Buying a vehicle that is two to three years old will almost always net you a better price, which will in almost every circumstance net you a better loan. While dealers prefer to sell new cars, financing all that markup is likely to saddle you with unfavorable finance terms since the loan gets riskier as the principal increases. Keep the principal down by reducing the price of the car and you’ll often find better loan terms become available.
The moment either a dealer or finance company commits to a price, shop it. Find a dealer or a finance option that gives you a better deal and then return to the original quote and see if you can talk it down. Anything that reduces the price of the car or the price of the loan puts money in your pocket and almost always gets you better terms when financing closes. Find those better deals even if it takes more time than you think it should. It will be worth it.