Tips on Car Loan Negotiation

Tips on Car Loan Negotiation

Car loans have increasingly become a popular mode of financing car purchases.If you plan to use an car loan to finance the purchase, you should learn how to get the best one. The most effective strategy in this case is to plan everything. Below are some tips which will help you in this process.

Always Negotiate The Price – This may sound simple enough but it can actually be difficult. One trick that is often used by car salesmen is to get you negotiating payments. You will be asked questions like: “How much are you looking to pay per month?” or “What do you want your payment to be?” Car salesmen love to negotiate payments as opposed to the actual price of the car. That’s because they want to set the price based on the maximum monthly payment that you are willing to pay. If you fall for this tactic, you will end up paying a whole lot more for your car. Negotiate the price, not car payments!

Keep Your Loan Term As Short As Possible – Dealers have come up with creative financing programs that will allow borrowers to lower their monthly payments.They do this by lengthening the number of years on the auto loan.It is however important to remember that a car is a depreciating asset and is losing value every year.The best loan term is 4 years or less.Under no circumstances should you ever take a car loan over 60 months.

Skip All of the Extras – Finance managers will try to get you to buy every option available.They will sell you gap insurance,rustproofing,fabric protection,extended warranties,paint protection and car alarms.Many of these are useful items but the dealer markup is ridiculous.They make huge profits by ripping customers off on these products.

Say No to High Interest Loans – Your credit rating will determine the interest rate that you get.Just because your credit is not tip top does not mean that you have to take a loan with ridiculous high interest rate.Individuals with good credit will get loans with single digit APRs. Individuals with average credit may get loans at 10% to 12%. Individuals with bad credit will be offered loans at 15% or higher. Many people with bad credit accept loans with interest rates as high as 24%. Never take a loan with exorbitant interest rates. No matter what your credit situation, it is never worth paying usurious interest rates just for the right to own a car.

Keep Emotions Out of Your Decision – Buying a car can be an incredibly emotional decision.After you have gone out for a test drive and gotten a test of the car,it can be difficult to leave.If the dealership is unwilling to negotiate,you should be prepared to walk away.If the dealership is unwilling to negotiate,you should be prepared to walk away.Remember that they are not doing you a favour by selling you a car. Don’t allow your feelings to get you stuck in a bad car loan that you will regret for years to come.

Categories: Financial tips