Get your financing before you go to the dealership
While dealer financing may seem more convenient than getting financing before you go to the dealership, you might find that the savings are worth the minor hassle. While dealers often get good financing deals, you may be able to get a better deal on your own. The bottom line is that if you don’t do the research, you’ll never know. Contact some lenders in your area and see what their rates are on vehicle financing. You may find a really good program that fits your situation to a “T.” Some of the things you should do to evaluate financing include:
- Shop for rates online. See what they are offering.
- Call a few local lenders (banks and credit unions).
- Do some payment calculations using online calculators. These calculators are readily available for free from many sources on the web:
- Don’t even think about the payment. Your job is to find a low rate. Once you find the rate, then you figure out what your payment will be based on the down payment you can afford, the vehicles you are considering, and the length of time you will be borrowing the money for. Note: Loans on vehicles for more than five years are rarely in the best interest of the consumer. Avoid longer term loans if at all possible.
- If you find a good rate and program, get pre-approved and take that with you to the dealership. It will almost always help your negotiations.
You may also find that there are better ways to fund your car loan than getting a car loan. What does that mean? Well, if you have equity in your home, you may want to take out a home equity loan to pay for your vehicle. The interest rate will probably be far lower than the interest rate on a car loan and you can also deduct the interest.
Here’s another surprise to many car buyers: You may find that you get a better financing deal through the dealership. Why? Dealers often negotiate with specific lenders and get “volume pricing” on loans. Good dealers may pass some, or all of the savings they get on volume financing deals on to their customers. Unfortunately, there’s no way to know if a dealer does this. If you obtain pre-approved financing that was well-researched before you go to the dealership, then you’ll know if you’re getting a better deal on financing at the dealer.