3 Smart Tips For Negotiating A Car Loan

Posted on: 21 March 2017

Finding a car that you like and want to buy can be a lot of work, and choosing the right car for you is a big decision. But choosing the car is only part of the job. Once you know what you want to buy, you have to negotiate your auto loan. For many people, that's the most difficult part of buying a car. Take a look at a few tips that will help you negotiate the best possible deal.

Aim for the Shortest Loan Term Possible

When you're buying a car on credit, you should always look for the shortest loan term you can get. A car is a necessity for many people, but it's not a good investment at all. Other investments, like a home, grow in value over time, but a car does not. Your car will depreciate the moment you drive it off the lot, and it will keep losing value from that moment on. Financially speaking, it's not smart to make interest payments on an investment that's losing value for any longer than you have to. If the loan term is too long, you'll eventually end up in a situation where you owe more money than the car is worth.

The key to getting your car loan paid off faster is usually to make a higher down payment and a higher monthly payment. Before you begin negotiations, figure out the highest amount you can comfortably pay down and monthly. Your down payment and monthly payments shouldn't drain your savings or impair your ability to pay your other monthly bills and expenses, but you should plan to pay as much as you reasonably can to keep your loan term short.

Negotiate the Price First

If you're getting financing from the dealership, you may notice the salesperson steering the conversation to how much you want to pay per month, not how much the total price of the car is. This is a common sales tactic, and it's understandable, since many people are looking for the lowest monthly payment they can get.

However, you already know that you're better off paying a monthly payment that's higher than the bare minimum. What you need isn't a lower monthly payment; you need a lower price than the sticker price. If the negotiations veer off into monthly payment territory, steer them back to the total price of the car. Worry about setting your monthly payment amount after you've gotten the total price of the car down.

Look into Different Loan Options

Speaking of negotiating with the dealer, it's a good idea not to jump straight to dealer financing. It's certainly possible that the dealer might have the best deal for you, but you should at least know your options. Check out other vehicle financing options. Your bank or credit union may offer a good deal but you won't know unless you ask.

If one lender offers a much better deal than the others, you may even be able to convince the other lender to match it. For example, if your credit union offers a better interest rate but dealer financing is more convenient for you, it's worth asking if the dealer can match or beat the offer you got from the credit union.

A car is a large purchase that you'll be paying on for some time. Don't be afraid to put time and effort into making sure that you have the best possible deal before you commit your funds to the purchase.