Four Negotiation Tips for the Best Auto Loan Rates on Dealership Financing
Author : Adam Porter | Published On : 22 Jan 2022
People have questions like whether they can negotiate the loan rates for their car or not. The first step to buying a car is looking for different car models. Once you find a few suitable options, test-drive the vehicles and finalize one of your favorite cars. The next step is to consider the car price and arrange for auto financing.
You can opt for dealership financing. In this process, a customer usually loses out on the chance to negotiate the auto loan rates. Once the dealer knows that you love a car, they enjoy an upper hand in the negotiation process. If you want to negotiate the best loan rates for purchasing your dream, here are four tips to follow:
1. Decide on Auto Loan First
If you want to buy your favorite car at affordable rates, your car buying process should start with an auto loan. Talk to dealers, lenders, and banks to find the average auto loan rates. Research the market, then decide on the car as per your budget. Once you fall in love with a vehicle, you are bound to stretch your budget for the same. All the dealers will try to make perfect use of that opportunity. So always manage your finances first.
2. Correct your Credit Score
Improving your credit score may seem impossible but it is a significant way of having control over negotiating the best auto loan rates. Keep a check on your credit score before you go out in the market to buy a car.
Get hold of your free credit report and analyze your credit score in detail. If certain items affect your credit scores, such as an unpaid loan or a missed payment, try to correct them.
People with a better credit score are in the position to negotiate their loan rates and get dealership financing at a favorable cost. Also, if you have a lower credit score, try to arrange for a co-signer and improve your chances of getting auto loan approval.
3. Consider the Total Cost of Buying a Car
One common mistake we all make is to focus on the monthly auto loan payments. We think the quote with the lowest monthly payment amount is the best option. But we should always focus on the total cost of the car.
For example, if you want to borrow $30,000 for the car, you will find many financing options available. A dealer may offer you a 3-year loan at a 3.5% interest rate. The monthly payment will be $879.
You have another quote for a 5-year loan at a 4% interest rate. The monthly payment will be $552. You may think that the second quote is better because it reduces your monthly cost. But when you consider the overall amount, the 3-year loan will cost you $31,646, and the 5-year loan will cost you $33,149.
If you fall into the trap of lower monthly payments, it will increase the total cost of the car. So, always consider the loan term and total loan amount while deciding upon the quote.
4. Evaluate & Negotiate
To get an affordable auto loan for your new car, work with multiple dealers and ask for different auto loan quotes. If the dealers know you have done the research and you have several quotations in hand, they will come up with the best loan rates for you.
Evaluate the loan quotes you have received from different dealers and try to negotiate the price of the car as much as possible. If the car price is low, you will have to take a small loan. It will reduce your financing cost and decrease your burden.
While going out for car shopping, we always have questions regarding the finance cost, loan term, and the dealer's prices. We often wonder how to get the best auto loan rates and afford a car, especially when choosing dealership financing. With the four negotiation tips you learned today, you will get the best auto loan rates.