Financing Your Next Car
Posted on , by Robert Pattison
Once you have negotiated the price for your vehicle, it is time to think about how you are going to pay for it. If the price is low enough that you can pay cash, it is the best way to go.
Cash is always the cheapest way and usually dealers will give you a good deal on a cash payment. As they always say “Money Talks”, so whether approaching a car dealer or a private seller you have a bargaining chip with the fact that you have money ready to hand over (very tempting for anybody), try to use it to your advatage and get money off.
But if you need to find some finance for a car, there are several options. You can use dealership’s finance office to find you a bank, you can use dealership (in house) financing or you can find your own bank.
Let’s discuss them separately so you know what you are going to be dealing with.
Car financing is a big business for the banks and dealers. Usually bank makes money on the interest and dealer on every deal they make. We have seen the paychecks of the finance department managers and we know firsthand how they work.
Generally speaking, it is going to be more expensive to go through the dealer’s bank, since the dealer has to take a cut whilst the bank still makes a profit; and you are the one that pays for it.
In house (dealer) financing may be cheap as far as the loan fees and charges are concerned, but interest is going to hit you hard, always be aware of this.
The best way other than cash is to find a bank that will finance your car. Go to your local bank where you do your everyday banking and ask them what options are available for you. Usually they are very good to their customers.
Assuming you have an above average credit rating, you should be able to get a competitive rate. Banks know that once you go to the dealership, the finance department will try to get you a loan, so your local bank will keep the interest rate lower than dealer might offer you.
As a common sense strategy, go to the websites like Kelly Bluebook and Cars.com, do the research about the current interest rates on car loans; it will give you more bargaining options and power to negotiate a successful loan term.
As far as the financial side of a loan is concerned, there might be a down payment required. If you make a down payment you should ask for lower interest. Remember that you paid part of a loan and the bank gets your car as collateral.
The more cash you pay, less is the risk that the bank is exposed to, so be tough, you are the customer, you can always go to another bank or a dealer to get favorable rates. Do not say it to their face but show that you are aware of the options you have. We always advise people to do their research before talking to any financial institution, as they are likely to try and get you to sign up for every deal they have going such as insurance on the actual loan itself.
Financing options are numerous and whichever you choose, try to be informed and have the knowledge of what the alternatives are before signing the papers. Be well informed and think it through.
Another good blog for getting sound advice on finance is Money Saving Expert