How to Get a Good Car Loan – Two Dealership Financing Mistakes to Avoid
In Get the Best Price on a New Car With 4 Simple Steps we give you all the tools you need to negotiate a great deal on a new car loan. However, it is often possible to save (or lose!) just as much on the cost of financing. Fortunately, you can often save a great deal on dealership financing by simply avoiding these two common mistakes when negotiating on a new car:
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Mistake #1: Telling the dealer how you plan to pay
Now, obviously you will have to do this eventually. The key though is to not get into how you will pay (cash, dealership financing, outside financing, etc.) until negotiations are finished and the price of the car is settled. (If asked, simply say you haven't yet decided.)
The reason for this is simple. The dealer gets a cut from their financing company when you choose to finance your new car. Therefore, if he thinks you may choose to finance, he may be willing to give you a lower price on the car, expecting to make up the difference with the financing.
While this might sound well and good, if you commit to dealership financing, two things happen. First, the salesperson may try to focus on the monthly payment, rather than the true price of the vehicle, making negotiating more difficult. And more importantly, you cut yourself off from other, potentially better financing options - so it's best to just keep your choice to yourself until the price of the car is settled.
Mistake #2: Not considering other financing options
Before committing to dealership financing for your new car, it costs you nothing to do a bit of shopping around (even if the offer is 0%, you're generally passing up on some cash-back or some other offer). You can check with your local bank or credit union, as well as easily grabbing some quotes online. For that we recommend AutoCreditExpress or CarsDirect, which both offer excellent rates for every credit score.
Once you've found your best financing rate, get a pre-approved check or letter from the outside lender. Then, when you've finished negotiating the price of your new car, ask the dealer to beat that rate.
If they do, great.
If not, you can simply stick with the outside financing you've lined up. Do keep in mind though that dealerships often offer a choice between an attractive financing rate and other offers, like cash-back. So when comparing offers, make sure to take into account anything you might be giving up to get the best rate from the dealer.
Ready to get started shopping for your new car? Use the AutoTempest new car quotes tool to get competing quotes from up to five dealerships near you.
Note: With the rate at which new cars lose value, borrowing money to buy a car isn't always the best idea. This video from DaveRamsey.com, Drive Free, Retire Rich, explains how you can put money in the bank and save from having to take out a loan.
You can also check out our full list of car buying advice guides and tools.