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Johnny Wright
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"Remember that most finance offices work on commission. It's their job to sell you on
upsells."
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Car Finance Deals
In order to get your best car
finance deal, it pays to do a little homework first. You may have negotiated successfully with your car
dealer for the deal of the century, but now you're only half done.
Your great new car deal is not in the bag just yet. Because unless you're
paying cash, you have to finance the car (or finance the balance of what you didn't cover on your trade in or down
payment).
Keep in mind that the finance
person's job is to squeeze as much money out of your as possible, because the dealership makes the most profit per
dollar off of "extras." These extras will be pitched at you heavily AFTER you've agreed on the car's price with
your salesman. The finance office guy works on COMMISSION.
But before we go further, it's
important to discuss whether or not you should pay cash for a new vehicle - if you can
afford to (which is rare):
Basically, it boils down to if
you'd pay more money in interest over the loan of the car than you would get investing that same amount of money
elsewhere.
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IMPORTANT TIP: Do
not disclose up front to the dealer that you are able to pay cash for the car! If you do,
most dealerships will put you into a different category of a prospect, and go about making sure
you pay more upfront for the car.
In fact,
do not disclose how you will pay for the car until you are finished
negotiations and are ready to buy. If the salesman asks you something like,
"So, are you paying cash or financing?"
...Your reply should be, "I'm not sure
yet."
This way, you can go about negotiating for the lowest
price for the vehicle possible BEFORE the finance department has a chance to work its black
magic.
Keep in mind that when you buy a new car, the deal should be made on the
price of the car, not on the monthly payments. Always keep this in mind when
negotiating with your car dealer's "finance manager".
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Five Car Financing
Options
1. Dealership
Advantages - Convenience, speed
Disadvantages - High pressure upsells, usually
not a good deal, loans are often "front-loaded," meaning your payments are mostly interest at the beginning -
designed this way so they still get more money even if you decide to pay it off
early.
But if you have no other option (i.e., you have bad credit so the banks won't touch you), you
can still get a decent deal. See this page.
2. Online
Advantages - Convenience, speed, usually competitive rates.
Disadvantages - No personal service, lookout for
some scams.
3. Bank
or Credit Union
Advantages - Personal service, no
high-pressure upsells, competitive rates, loans are simple interest (interest spread out over loan), and good
advice (they can tell you of you're paying too much for your vehicle).
Disadvantages - Inconvenience of having to set
your loan up during banking hours (no nights or weekends).
4. Home Equity
Loan
Advantages - You can deduct
some of the interest from your taxes, competitive rates.
Disadvantages - Your car is now tied to your home, which may be
risky.
5. A
Friend Or Family Member
Advantages - Obviously, this can be a very flexible, low or no-interest loan.
Disadvantages - Be careful! You could jeopardize a relationship, doing it permanent
harm if something goes wrong. Judgment call here.
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