Want to get a good interest rate on your car loan? It can be intimidating, especially if you have bad credit – but getting a good rate on your next car loan isn’t impossible with a little work and research done beforehand. Here are a few tips for getting the rate you want – whether you’re negotiating with a dealership or another lender.
Know exactly what car you want to buy, and how much it’s worth
If you go into your loan negotiation knowing exactly how much money you need, you’ll have a stronger edge. You can be more decisive when you know exactly how much you need.
Know how much you can afford in monthly payments and refuse to go above it
Knowing your budget is also crucial. You need to know exactly when a deal ceases to be viable for you – and the point where you’re willing to walk away. Don’t get sucked into discussions about lengthening the term of the loan to reduce an untenable interest rate, however – you’ll only pay more over the long run. It’s better to have a total figure, a total term period, and an ideal monthly payment in mind.
Be polite but firm
Avoid going into any situation with an aggressive or hostile attitude. You may see some successes this way, but more likely, you’ll meet resistance. Instead, be cordial to everyone you negotiate with, but be firm. Don’t be afraid of silence – remember, the person who speaks first loses the negotiation.
Know your credit score and be ready to compensate for problems
If your credit score is less than perfect – as a lot of people’s are, you’ll need to know it inside and out. Know exactly which parts of your score could make a lender think twice about giving you a good rate on a car loan and be ready to present yourself as not just a good credit risk, but an excellent run. Bring documentation: pay stubs, a utility bill, letters of recognition from bosses and friends, medical bills – anything to demonstrate that your credit got rocky through extenuating circumstances, and you’re successfully turning the situation around now.
Go into the car dealership with a check in hand
It’s in your best interest to get your car loan from a lender other than the dealership. This way, you have a maximum amount that you’re able to spend and you can’t be talked up by the salespeople. In addition, online lenders and banks often will give you better interest rates than dealerships will.
Most people shop around for cars but it wouldn’t occur to many to shop around for car loans. It’s a common misconception that too many inquiries into your credit for loans will damage your credit history; actually, in this situation, it is unlikely that you will be penalized for shopping around to get the best rate. Talk to several different lenders – you can usually get a quote quickly online by asking online lenders and have a good idea of a realistic interest rate from various lenders. It also can’t hurt to tell the lender you’re negotiating with that a different lender offered a lower rate – and find out whether they can match it.
Negotiating a car loan doesn’t have to be difficult, even for someone with bad credit. Don’t see your lender’s first offer as the end of the conversation. Be ready to talk about the reasons for negatives in your credit history and prove your credit-worthiness; know exactly how much you need and how much you can afford; and know your own credit score. This will help you go into the negotiation knowing what you need to know to negotiate the best deal.