Photo Credit: Edmunds
5. Get Pre-approval
Do not let the dealership decide what your interest rate will be. They make money off your loan and the higher the interest, the more money they will make. And after all they are in the business to make money. Avoid this by calling a bank or credit union that you would like to do business with.
Keep in mind that not all loans are created equal. Ask the loan specialist if the loan contains front loaded interest. This is when the majority of the interest is paid at the commencement of the loan as opposed to being dispersed throughout the entire length of the loan. Ask if you can pay the loan off early without incurring a penalty fee. And, consider making a payment on a bi-weekly basis to pay it off quicker.
Once you fill out a loan application they can tell you what your interest rate will be if you choose to do business with them. Make sure the amount you ask for will cover the entirety of the loan and not just the sale price. Ultimately, you can borrow less if you ask for too much but can not add more to the loan. You will have to reapply for a new one. Once you are pre-approved arm yourself with this information to negotiate a lower APR at the dealership.
6. Test Drive Dealerships Not Just Vehicles
Use several dealerships as your guinea pigs before arriving at the dealership you plan to strike a deal with. This is a great way to test yourself and use different negotiation strategies to see what works and what does not. Of course, every salesperson you work with will be different, some pressure more than others, so keep that in mind. Don’t be afraid to ask for a different salesperson if you are not meshing well with the one who has approached you. Treat the situation as if you are an employer seeking to hire an employee. You want the best person for the job. Like wise when purchasing a vehicle.
**This is part 3 of a 6 part series.
PART 5: Using Non-Verbal Cues
PART 6: When to buy