Car Financing Tricks

Buying a car can be a stressful experience, especially when you do not know if you are getting a good deal. While dealerships will employ a variety financing measures to put you in the car of your dreams, it is important to remember that they are in the sales business and working to turn a profit. It is helpful to know what to expect at the dealership to ensure you walk away feeling good about your purchase.

Credit

Always check your credit score before heading to the dealership. Auto loans are based on credit scores, and knowing yours in advance can help you avoid surprises. While dealers will run your credit, it is rare that they will let you see the report, and unscrupulous dealers may lead you to believe that your score is lower than it actually is. When you know what they know, you can use the information as leverage. Research average interest rates for your credit score bracket so you know what to expect and can rebut rate propositions that are higher than the average. If you have poor credit, you may want to look into outside financing options that are intended to help buyers build or rebuild credit instead of financing through the dealer. Prequalifying for a loan with your banking institution can also eliminate the need to negotiate financing with the dealer.

Price

The price of a vehicle and the sum of your payments are two very different numbers. While the total payment price will be higher due to interest, be wary of dealers who steer your attention toward the monthly price instead of the big picture. Low monthly payments often correspond with large down payments or extended loan terms, both of which may not match your financial situation. Know the total price that you want to pay for a vehicle and stick to it. Read the fine print of your financing agreement; additional fees and charges are sometimes buried in the pages. Be sure that the contract matches the payment plan and agreed-upon retail price before you sign.

Extras

Once you are done negotiating with the salesman, it becomes time to negotiate with the financing office. Your interest rate and price may be agreed on before entering the credit manager's office, but additions such as GAP insurance, warranties, clear coating or credit life insurance are often pushed by the credit department instead of the sales team. These add-ons are not legally required, and if you choose to participate, it is not necessary to purchase any of these options from the dealership. You might be able to find less expensive optional coverage from outside lenders. If the dealership pressures or suggests that interest rates must increase if you decline these coverages, be prepared to walk away.