Auto Financing 101

Most people think that getting a good deal on a car is an extensive and exhausting process consisting of shopping around and haggling. While it does take the right knowledge and negotiating strategies, some simple tips are all it takes to get the best auto financing. It is important to get the best base price on a car as well as the best financing terms if you want to get the best overall deal. Before you buy your next car consider these tips to get the best price all around.

It is important to settle on the total price of the car before you discuss payments. Know how much you can afford going in and calculate the monthly payments for that amount over the duration of the loan that you want to make sure you can afford the payments. Many dealers will try to negotiate the monthly payment amount instead of total cost because they can charge more overall by extending the loan term and adding in hidden expenses. Always tell the sales person you might pay cash and determine a total cost you are comfortable with first before you discuss payments.

Check out the current financing rates from lenders outside the dealership before you consider dealership financing. Check out web sites like to see what lenders are offering currently. Talk to your local banks and credit unions as well to see what their current rates are and if you qualify. When you go in to the dealership with this information you have an advantage and can see if the dealership wants beat those rates or if you should finance else ware. Letting dealerships know that you can obtain financing at a better rate somewhere else forces them to offer you competitive auto finacing rates if they want to finance your loan.

If the dealership you purchase from is running a promotion you will also need to decide which promotion is best for you. It is common for dealerships to run promotions offering cash back incentives, discounts, or low or no interest. Cash back incentives and discounts can range from a few hundred to a few thousand, and promotional interest rates can range from 0% to a few tenths of a point lower than the current market value. The right promotion for you depends on the total cost of the car and if you are paying cash or the amount you are financing. If you are paying cash you will benefit from the cash back or discount, but if you are financing you may save more money in interest over the life of the loan than if you took the cash back. Calculate your total interest savings and compare it to the amount of cash or discount offered to see which option is best for you.