Many people fear buying a new or used car simply because they hate dealing with a car dealership. They advertise everywhere and bombard you with advertising messages daily. Some offers are legit but most are merely there to entice you onto their sales lot. By learning how to see past all the hype and by doing some simple planning you can save thousands on your next car or truck purchase.
For starters, you should know what your credit score is. You are entitled to a free copy of your credit report once a year. During this process you can for a small fee obtain your credit score.
The credit score is the number one factor banks and lenders look at when offering credit. The dark economic climate has forced lenders to tighten credit offers. If your credit score is lower than 700, you likely won’t get a low interest rate. Dealers still use these rates through because it gets onto the showroom floor.
What many people don’t know or realize is that many dealers negotiate price based on these offers. In a typical 0% financing auto loan offer, the dealer retains all rebates and kickbacks from the manufacturer in addition to their profit. Once people are told they do not qualify for the special rate they never reenter price negotiations and wind up leaving a lot of money on the table.
Employee Discount Programs are also popular incentive programs which have gone by many different names over the years. This is generally where a dealer slashes the price of the car or truck by offering you all the discounts and incentives. The catch is you have to pay the full interest rate in financing which in most cases are high even for shoppers with over 700 credit scores.
Also, the finance department at the dealership will typically charge you a fee of around $300 for processing the paperwork. This fee is financed into the deal and is easily overlooked. The finance officer will also try to sell you on warranty programs and insurance which pay the dealership large commissions.
So what should you do? The best thing to do is to steer clear of the auto finance department all together. Talk to your bank, or better yet, join a credit union and talk to the loan officer about what interest rate you will qualify for based on your credit score and how much you can borrow. Use an online loan calculator to play out different scenarios based on purchase price, loan terms, and interest rates. With this knowledge and a pre-approval letter, negotiate a cash purchase for your vehicle.
Loan calculator Tools is a website that provides a free loan payment calculator to help with planning your next home or auto loan. Use our free car loan calculator to calculate your auto loan payments.