10 Tips for Getting the Best Auto Financing Deal
Are you in the market for a new car? Do you need more space to accommodate a growing family? Are you looking to cut down on fuel consumption and get more miles per gallon? Or, do you just want to splurge on something flashy and fun?
Buying and financing your new vehicle doesn’t need to be an unpleasant experience. Follow these tips to educate yourself and get the best auto financing deal.
Before You Start Car Shopping…
1. Know Your Credit Score
Before you start the process, take advantage of your ability to get a free credit score report every year. Knowing your credit standing can be extremely helpful in the negotiation process. A higher credit score can open up doors to the best auto financing deals, since you’ll be offered more favorable interest rates which can impact your auto loan payment immensely.
2. Do Your Research
There are several all-encompassing websites you can visit to learn all about the car brands you’re looking to purchase, whether new or used, sedan or SUV, domestic or foreign. You can research a specific car, read reviews, or find out which cars are top safety picks and which cars have the worst resale values. We recommend sites like Cars.com, Edmunds, J.D. Power, and Kelly Blue Book.
3. Go Right to the Source
Most dealerships have online sales departments and live chat available for questions. Take advantage of that service by asking for price quotes and current buyer incentives at that particular dealership. You’ll then be equipped with a realistic offer prior to visiting the dealership.
4. Get Pre-Approved
Just like you would when shopping for a new home, visit your local credit union or bank for pre-approval for a car loan as well. You’ll know what loan amount and what interest rate you qualify for, and this will help you determine what price range of cars you can ideally afford.
5. Study Up on Your Trade-In
In most cases, you’ll have a trade-in vehicle. The trade-in payment that the dealership offers can go towards the downpayment on your new vehicle, so negotiating the best possible price is important. Before car shopping, research the current trade-in value on your current make and model car. But remember to have realistic expectations for trade-in pricing, especially on older vehicles or vehicles that need repairs.
At the Dealership…
6. Ask About Incentives
You’ve already researched incentives online, now when you’re at the dealership, ask about those incentives you discovered or if there are additional incentives being offered including manufacturer offers. These offers may include special financing or manufacturer discounts for credit union members. Additionally, you can view offers on dealer and manufacturer websites before visiting the dealership.
7. Take A Test Drive (or Two)
Take a few test drives before you make your decision. The average new vehicle costs $32,000, so it makes sense to take a proper test drive before purchasing. You may find that the car of your dreams really doesn’t work best for you. Visit the dealership with the sole purpose of the test drive.
When Working Out a Deal…
8. Make a Downpayment
If you’re in good credit standing you may not be required to put any money down on a new car, but it’s still a smart idea to do so. To get the best auto financing deal, aim for a 20% downpayment, which will result in less cost to finance.
9. Don’t Focus on Monthly Payment
While it’s important to understand the maximum amount you can afford to spend each month on your car payment, don’t let this number control negotiations. Instead focus on the total cost of the car, your old car’s trade-in value, and the interest rate on your loan. Otherwise, you can end up with an affordable monthly payment on a car you’re paying too much for.
10. Go For A Short-Term Loan
While you can finance your new car for 7+ years, a shorter-term loan will cost you less in the long run, as interest rates increase as your loan lengthens. Pay a little more each month to pay off your loan sooner.