Step Back
Don’t walk into a dealership and agree to buy a car, especially if you want to buy one at a fair price and decent loan rate. You need to explore your financing options first.
Learn the Lingo
Before you call or visit lenders and ask them about what sort of financing deal you could get, learn the terms they commonly use. Learn the difference between the interest rate and APR. The interest rate is the percentage it will cost you to borrow money. The APR is the actual annual interest rate, including the fees and other costs related to the loan.
Explore Your Options
Despite what dealers say, they may not be able to get you the best rate on a loan. Most states don’t even require them to disclose the markup they add, and dealers stand to make a lot of money from the financing and insurance side of their business. If you meet several lenders like banks or credit unions, you could find the best rate yourself. The ideal thing to do is maintain a good credit record and get preapproved for a loan. That way, you can haggle with the dealer about the total price of the car and not be conned by their low monthly payment schemes.
Finish Loan Shopping in A Week
If you are shopping around for a loan, limit the auto-loan credit inquiries to the same week. That way, it won’t impact your credit score. Inquiries in the same 14-day period are counted as a single query and won’t impact your score.
Visit the Dealer
Once you have preapproval for a loan, or have found good financing terms, visit the dealer and negotiate a price for the car. Never accept the first offer you are given and never tell the dealer how much you want to pay monthly. They will use this information to add back-end fees into the loan. Do the math patiently. Understand the vehicle price, monthly payment, and loan term. If you have pre approval, the dealer may try and beat that offer. Still, be careful about extended warranties, prepaid maintenance, key-loss insurance, and anything they try to add on. Check all documents patiently, and only close the deal when you’re absolutely sure.