Financing a vehicle

Financing a vehicle

Negotiating the best price for your new car can take a lot of determination, as dealerships spend an extensive amount of time training their entire staff to squeeze you for every penny. Additionally, if you don’t have your own bank financing in place, you will have to negotiate the finance contract as well. This is where many people get tripped up, thinking they have negotiated a great price for the car only to get hosed by a fast-talking finance person. However, never fear.

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Keep reading as the experts at Boise Bank explain more.

Negotiating the Price
While there are places like Carmax, where the vehicle price is written in stone, most dealerships will negotiate on price, if they want the sale. Remember, the price you agree to pay for the car is what the financing is based on. Obviously the interest on a $35,000 loan is going to cost you more in the long run than the interest on borrowing $25,000. Use sites like TrueCar.com to see what the price range on your desired vehicle is. If you can’t get the dealership to give you a price on the lower end than go to another dealership.

The Loan Term
The number-one trick finance people love to play is extending the loan term to reduce your monthly payment. The finance person will ask you something like, “How much do you want your monthly payment to be?” Salesmen would rather negotiate the monthly payment amount, as opposed to the price of the car. This is because the dealership wants to set the price of the car based on the maximum monthly amount you can afford. If you let them manipulate you like this you will end up paying thousands more then what you should for the car. This is simply because the smaller the monthly payments are the longer the loan term has to be for you to pay off the loan, and the longer the loan term the more interest you will pay. Typically, the best loan term is three to five years, and never more than five.

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Negotiate the Interest Rate
While your credit rating will determine your APR to a large extent, never accept an outrageous interest rate. People with outstanding credit are sometimes offered loans with a zero-percent APR, but even people with bad credit should be able to get a loan for 15 to 20 percent. Never accept a loan with a APR higher than 20 percent. If you have a high interest rate, paying the loan off ahead of schedule will get you a refund on the interest, and a better rate next time around.

Just Say No to Extras
Car salesman love to run up your bill by adding exorbitantly overpriced extras you may not need and that you can most certainly get cheaper elsewhere. For example, our dealership was happy to sell customers a set of floor mats for five to 10 times what they would pay elsewhere. Be sure your vehicle has a good standard warranty and forget the extended one the dealership will sell you at triple the cost of an aftermarket one. Just say no to extras.

Check Your Emotions
Don’t fall so in love with a car that you give up the most powerful negotiating tool you have, your walk-away power. Dealerships are there to sell cars, and if you get up and leave they lose. Obviously they are not going to give you the store, but if you stand firm and just suggest you will go down the street they will usually come around. Always remember, whenever you buy anything, you are the boss.

 

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