So you’re buying a new car and you’re looking for car financing. You’ve done your research, compared car options and you know exactly what you want. The only missing aspect of the entire picture is the right financing.
If you’re planning on dealership financing, you have to come prepared with your haggling skills. Expect the salesperson to sell you everything including unnecessary accessories and extended warranties. The sales pitch is going to be crafty and convincing but don’t be fooled. In order to get the best deals, you have to do some negotiating yourself and below are some tips to do exact that:
Start with the Car Price
When you go to any dealership, one of the most common questions salesmen ask is, “How much is your budget for the monthly payment?” Rather than answer the question, you should start the negotiation process by asking about the price of the car that you already have in mind. Granted that you did your homework before going to the dealership, you should have a rough idea of what the car will cost.
You have to know that car salesmen negotiate car financing based on monthly repayment rather than on the actual cost of the car. They do this so they can set your monthly repayments at the maximum you can afford. When haggling for a better deal, focus on the car’s price and not car payments.
Keep the Term Short
Majority of car buyers who are looking for car financing wants a lower monthly repayment. Car salesmen know that and they take advantage by urging buyers to opt for the longest term possible. While your monthly repayment is lower for long term loans, you end up paying higher interest in the long run not to mention that your car has already depreciated significantly before you completed the repayments.
Some dealers now offer loan terms up to 7 years. Avoid going that route unless you want depreciation to hit you hard. According to some experts, the best term is 4 to 5 years.
In order to rack up your car payments, car salesmen will try to sell you practically every extra they can think off. From warranty extension to car alarms, paint protection and gap insurance, the list could be endless. To make everything as simple and straightforward as possible, you just need to skip them all. Your goal at this point is to not get ripped off by these unreasonably priced extras. Once you’ve sealed the deal, however, you can look elsewhere for extras that you think you need at much affordable prices.
Prepare to Say No
Interest rates for car loans vary from customer to customer. If you have good credit, the interest rate is obviously lower than when you have bad credit. On average, those with good credit can often avail of loans at 10 to 12% interest while those with bad credit may be charged with 15% or higher. Other loan options come with as much as 24% interest for people with less than perfect credit ratings.
When the interest is too much, you have to be prepared to say no. Remember that paying hefty and unreasonable interest fees are not worth it just so you can buy your car. If you’re patient and you keep looking, you’ll be able to find a good deal in the end.
When finalizing your decision whether to go for it or not, remember to remove your emotions out of the picture. Don’t be carried away with how satisfied you were when doing the test drive. If you think that you’re not getting the best end of the deal, it’s better to walk away than give in.
In the art of negotiation, both parties should at least end up in a win-win situation. If you’re being ripped off with hefty car payments then that’s not at all the best way to go.