The process of buying a car is challenging. You have to handle paperwork, and getting appropriate financing may be difficult. If you do not do your due diligence, you might pay more for a car loan than you have to.
Car dealers have specific price points they won’t go under. Still, it is possible to negotiate with the dealer’s finance department to improve what you pay for your vehicle. The following tips could save you money when it comes time to purchase your next vehicle.
Know What You Bring to the Table
Before you look for a car, evaluate your financial situation. How much money are you comfortable with spending on a new vehicle?
Your credit score is what determines the approval of your loan, your interest rates, and more. You can check your credit for free periodically to give you an idea of where you stand. A higher credit score will get you lower interest rates. A credit score of between 800 and 850 is considered to be an exceptional credit score. A good credit score is between 670 and 739, whereas poor credit is between 300 and 579.
If you have managed your finances to where your credit is in the exceptional range, you will have improved negotiating power. With good credit, you will have some options, but they could be limited. Those with poor credit may not have as much bargaining power, but there could still be options.
If your credit score isn’t where you would like it to be, and you can put off purchasing a car for a few months or years, use the time to improve your credit. This will help you save money over the life of the loan.
Know What You Can Afford
If you want a quality vehicle, you want to find innovative financial solutions that allow you to get a car you can afford. You have to take the time and search for the best deals available.
Depending on your affordability, you must think about all costs connected to vehicle ownership. This includes loan payments. A loan payment contains the principal, the vehicle’s actual price, and the interest. Factor in taxes, fees, and other additional contracted services. You can lower your monthly payments with an initial down payment. Some dealerships may offer cars for $500 down payment that have a competitive interest rate.
When you have identified a vehicle within your price range, you need to research auto loans and interest rates. Dealers don’t have to give you the best rate you qualify for. The rate they quote you could include compensation for the dealer setting up the financing between you and the lender. Shop around for a while before making the decision. Comparing auto loan rates among multiple lenders is time-consuming, but it is worth it if it can lower your interest rate.
Lowering the Auto Loan Interest Rates After You Get the Loan
You tried to negotiate a lower rate, but your negotiation efforts failed because of poor credit history or low down payment. However, you don’t have to pay the high-interest rates for the rest of your loan. You can refinance your car loan with a different lender once your credit score improves.
Check your credit score frequently. If there is any fraudulent or inaccurate information, dispute it. Pay your credit cards and your car loan on time. Consider refinancing your car loan once your credit score improves or interest rates have gone down. As you go through this process, you want to search for multiple lenders and compare rates as you did for the original loan.
If your credit isn’t in great shape, you might not qualify for the best interest rates right now. This doesn’t mean that you can’t negotiate or that you have to settle for a higher loan.
Take your time. Work to reduce the amount of risk you pose to lenders. If you can wait on getting a car until your credit score improves, do so. If your negotiation does not produce results, be ready to walk away from the loan. You will eventually find yourself with a car you can afford.