| Bob Sherman Credit |
Auto Loans
Your auto loan is a major expense. A new car is second only to a home as the most expensive purchase many consumers make. So it is very important to shop around for the best deals on your auto loan.
You need to think about your auto loan as much, or more than, the actual car you intend to purchase. While often the new car you purchase is an emotional decision, your new auto loan should be well researched. Do not simply accept deal financing. You can usually get a better auto loan elsewhere.
Think about what car model and options you want and how much you're willing to spend. Do some research. You'll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal.
After all, the more you spend for a car, the bigger your auto loan will be. And, the bigger your monthly payments will be. So, go the a dealership prepared, knowing exactly what model and features you want.
Consider these suggestions:
- Check publications at a library or bookstore, or on the Internet, that discuss new car features and prices. These may provide information on the dealer’s costs for specific models and options.
- Shop around to get the best possible price by comparing models and prices in ads and at dealer showrooms. You also may want to contact car-buying services and broker-buying services to make comparisons.
- Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, often between 10 and 20 percent. Usually, this is the difference between the manufacturer’s suggested retail price (MSRP) and the invoice price.
- Because the price is a factor in the dealer’s calculations regardless of whether you pay cash or finance your car — and also affects your monthly payments — negotiating the price can save you money.
- Consider ordering your new car if you don’t see what you want on the dealer’s lot. This may involve a delay, but cars on the lot may have options you don’t want — and that can raise the price. However, dealers often want to sell their current inventory quickly, so you may be able to negotiate a good deal if an in-stock car meets your needs.
There are two basic ways to save money on your auto loan:
- If you have significant savings earning a low interest rate, consider making a large down payment to reduce the amount of your auto loan or even paying for the car in cash. This could save you as much as several thousand dollars in finance charges.
- You can save hundreds of dollars in finance charges by shopping for the cheapest auto loan. Contact several banks, your credit union, and the auto manufacturer's own finance company.
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To help you in your search for a good automobile, here is a free ebook about car buying tips. It's information you need to save money. Click to view or download.
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