A vehicle in an auto dealership.

Negotiating Your Auto Loan

Vehicles are more expensive than ever, which is why it has never been more important to practice good negotiating skills when making a purchase. If you are in the market for a new auto, here are a few tips that can help you save money.

Save On The Purchase Price

First, let’s have a look at some tips that can help you save on the purchase price. If you are shopping a dealer, this is a number that your dealer would like to disguise by convincing you that the payment is all that matters. Don’t let them misdirect you and get you focusing on the wrong number.

Know Current Values

Never go into a dealership just looking for a car. Always narrow down your selection so that you can do plenty of research ahead of time.

With one or two models in mind, you can investigate current market rates so that you can spot a good deal. Search for the vehicle values on the NADA and Carfax websites and play around with different mileages and options so that you have an idea about how they affect the price. Print out a few example values so that you have something to reference later.

Also, be sure to look at listings offered by other dealers in your area so you can see how different dealers are pricing the models you are looking for.

Turn Down Dealer Adds

A trick that many dealers use is to increase the price of a vehicle with dealer add ons. It might be something like vehicle security etching for a cool 400 dollars or tire protection for 300 bucks. Whatever the case it usually adds a lot of money to a vehicle price while providing little value to you.

If you find that your 15000 dollar vehicle is suddenly 17000 dollars because of dealer adds, ask for them to be removed. If they refuse, try to negotiate the price of them or simply follow the next tip.

Be Prepared To Walk

In a vehicle negotiation with a dealer, you always need to be prepared to walk. 9 times out of 10, they will stop you and offer you a better deal or start seeing things your way. If not, you are probably better off with another dealer that is willing to work the price.

Avoid The Company Store

Finally, one last way to get a better price is to not shop the company store when looking for a used car. That means that if you are looking for a used Ford, look at the vehicles at a Honda dealership first.

The reason that this works is that a used Ford is more valuable to a Ford dealer. People looking fro a used Ford will hit the Ford dealer first, which means that they have more demand. In addition, when people are looking for a new Ford and find they can not afford it, they will often be switched to a new model. What this all means is that there is more competition and demand for a vehicle at the company store.

Save On The Financing

You have the price you want, but the battle is far from over. Now it is time to negotiate your vehicle financing. Here are some tips.

Get Pre Approved

If there is one thing that you should do before visiting the auto dealership it is to get pre-approved for financing. If you decide to rely on the dealership’s finance department you will certainly lose money.

Dealers are notorious for making money on the back end of the loan with financing tricks. The bank might offer you a 6 percent loan, for example, but the dealer will offer you 8 percent. The extra 2 percent in interest goes directly into the dealers pocket.

By getting approved from a bank, or even better a credit union, you will know the rate that you truly qualify for. You can then either use your financing or give the dealer an opportunity to beat the rate. In any case, you come out ahead of where you would be if you simply trusted the dealer.

Everything Is Negotiable

When you get back to the finance department, they will try to add a number of charges to the vehicle contract. Remember that all of these charges are negotiable because the dealer is adding on money for themselves.

Examples of some negotiable charge include GAP insurance, extended warranties, document fees and even advertising fees. The dealer counts on the fact that, by the time you get to finance, you are ready to go home and willing to accept these charges as is. Take the time to negotiate all of the little charges and you could save hundreds of dollars.

When negotiating, your most powerful tool is “the walk”, so be prepared to leave and never get your heart set on a vehicle before it is officially yours.

Warranties Are A Tool

One last tip is to watch out for extended warranties being used as a tool to increase dealer profit. Many times a dealer will, for example, claim that you can get a better interest rate by purchasing a vehicle warranty. They drop the interest rate and you get stuck with a warranty that the dealer makes thousands of dollars on.

By using your knowledge of how dealers make money with these tactics, you can come out ahead in the end, so be aware. If you do get stuck in a warranty that you do not really want, here is a fun fact. Most warranties can be cancelled within 30 days for a full refund. That means that you could potentially turn this tactic around on your dealer. Get the better deal and then change your mind and get a warranty refund.

Posted by
James Car

James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.