Financing a New Car? Don't Blow It
By Teresa Ambord
Shopping for a new car? Before you do, be smarter than the majority of new car buyers. You can spend months scouring the Consumer Reports to find a reliable, high-performance car, and blow it at the dealership.
Number One Consumer Mistake
In a survey of 100,000 new car buyers (60 days after their purchase) consumers answered the question: what was the number one mistake you made in the process of negotiating your sales price? The overwhelming response was: they failed to check into other financing before going to the dealership. Dealers are experts at mixing up the sales price negotiation with the financing. So often you get a good sales price but with expensive financing, or excellent financing but a ridiculous sales price. Obviously you want both a good price and cheap financing.
What Dealers Don't Want You to Know
It’s a little known fact that dealers make most of their profit not from the sales price, but from the financing. Why
- Consumers often go into the dealership unaware of what interest rate they deserve, based on their credit report. Accepting a rate of even 1% higher than you qualify for can cost you at least $500 extra over a four-year loan.
- Relying on the dealer to finance your purchase gives him a golden opportunity to hide closing and processing costs of up to $350 extra dollars in your loan agreement.
Make a Cash Offer
Check first with your credit union, the bank that has your checking account, and other finance institutions that advertise good rates. If you get pre-approved, you are essentially stepping foot on the new car dealer’s lot with an offer of cash, a very enviable position. Then you, not the dealer, are in charge and you can focus on negotiating a great sales price.
Edmunds.com has a Buying Advice Team that suggests you check first with Lending Tree. Lending Tree is a free, no obligation auto loan shopping service. It’s quick, easy, and private.
Less Than Perfect Credit?
Don’t be tempted to go to the dealer for financing just because your credit is bad, or you have bankruptcy in your history. Even people with blemished credit can get financed; they just pay higher rates, regardless of who finances them. Checking ahead will accomplish two things:
- Allow you to see the bottom line before you fall under the spell of a slick salesman with a bag of tricks.
- Afford you complete privacy if you hear the news that your credit is not so good.
Does it Take Long to Get the Money?
Once you are approved, you can have a check draft as soon as the next day. And the loan is not activated until you have endorsed the draft. If you change your mind and decide that you don’t wish to buy at this time, no harm done.
David vs. Goliath
If you’ve ever made a new car purchase the wrong way… that is, going to the dealership hoping to finance the car there, you know that you can feel a little like David and Goliath. It’s not an accident that car salesmen have such bad reputations. They seem to operate on the premise that they will hook you hard on the car, getting you to see yourself owning it. If you’re not careful they can have you dancing like a trained poodle, willing to do anything to get the car.
Instead, go armed with information, and you’ll be the one in the driver’s seat.
