Too often, when consumers shop for a new car, they are so focused on the price of the car, they take their eye off the real ball: the cost of the money.
If you want the very best deal on a new car, shop for financing before you go to the dealer.
Check out interest rates at your bank or credit union. If nothing else, "shopping"
current interest rates from other auto
loan lenders will give you the information you need to "deal with the
dealers" and can save you hours in the finance manager's office.
Another option for low interest financing is to consider a home
equity loan. With a home equity loan, you are borrowing against the value
of your home. Not only can interest rates be lower than auto financing, but the
interest on home equity loans and lines of credit is 100% tax deductible. But
beware, you are putting your home at risk in the event you default on the loan.
If you are more concerned about the monthly payment than the cost of the money,
securing a lower interest rate WILL lower your monthly payments.
Here is a step–by–step blueprint for negotiating the very best deal when you buy a new car:
When negotiating the cost of the vehicle, in order to get the best deal, only discuss the price. Do not focus on the issues of financing, down payment, or the value of a "trade–in." When the salesperson asks about how you intend to finance your car, say you haven't made a decision and that you want to know his "best price" before you even consider finance alternatives.
Select the options that best meet your needs. (The cost of these can and should also be negotiated.)
Determine which add–ons or upgrades make sense, for example: tire packages. (It is not unheard of for dealers to mark up add–ons or upgrades by as much as 400%).
Decide whether you need some, or any, "after–sell" items. (For example, unless you live by the ocean, or in an area where they salt the roads during winter months, rust protection may not make sense).
YOU ARE NOW FINISHED WITH THE SALESPERSON AND WILL BE "HANDED OFF" TO THE FINANCE MANAGER.
The first question you should ask the finance manager is, "What will my interest
rate be?" The second, "How do you calculate it?" There are different methods of
calculation.
SIMPLE: APR calculated daily;
FIXED: APR unpaid balance monthly; and,
ADD–ON: Flat fee yearly. (Beware, "add on" rates can appear to be much lower).
If the rate and the way it is calculated does not meet, or beat, the best deal that you found elsewhere, tell him the rate you want and where you found it. Don't be afraid to tell the finance manager that if he wants to close the deal today, "It's my way or the highway!"
If he insists that he "has little room to move on the rate," simply inform him that if he won't move, you will (i.e., you will either get your financing, or your new car, elsewhere).
Once you agree to the deal, it is imperative that you follow these steps:
Always write down the price, the rate and any other vital information you negotiate in order to compare "the deal" to the wording in the contract.
Carefully review the contract to confirm that all numbers are accurate and all promises are documented, in writing:
Be sure the contract states the rate you were quoted.
Be sure the contract clearly spells out:
the total amount of the finance charges;
the term of the loan;
all motor vehicle and documentation fees; and,
the exact monthly payment, including taxes.
Do not sign a contract that contains any blank spaces, or is not complete.
Do not leave the dealership that day without a copy of the contract, or any other document that you signed.
