When you purchase a new vehicle, it is not just about getting a good price on your vehicle, it is about getting great financing terms as well. Your financing terms will determine how much you actually end up paying for your vehicle.
#1 Understand Your Credit Score
Before you head to the dealership, you should know what your credit score is. All the major credit companies are required to provide you with a free credit score at least once a year, and there are sites that also provide you with free access to your credit score.
Understanding your credit score before you set food on the car lot will help you better determine and figure out what type of car loan you will qualify for.
For example, if you have a perfect credit score of 750 or higher, you may be able to get those special low rates that the dealership advertises. If you, however, have more of an average credit score between 750 – 600, you are going to face more mid-range interest rates. If you have a really poor credit score, you more than likely can still get a loan, but the interest rate is going to be much higher.
Understanding your credit score will help you understand what type of financing offers the dealership may offer you before you even walk in. This will help you determine your negotiating strategy. For example, if you know that you have a low credit score, you are going to want to negotiate a shorter term loan and go for a lower sticker price on the car to compensate for the higher interest loan you are going to be offered.
#2 Keep The Terms Short
Pay close attention to the loan terms instead of the monthly payment amount. The loan terms is what determines how much you actually pay for the vehicle, combined with the interest charged on the loan.
A car that you pay off over six years instead of three years may seem cheaper on paper because the monthly payments are smaller. However, the amount of interest you will pay over those three additional years will increase the total cost that you will pay for the vehicle.
When negotiating the terms of the car loan, if you can't get the dealership to change the interest on the loan, try to get loan terms shortened. This will help you save money on your vehicle.
#3 Make Sure There Is No Early Pay-Off Penalty
Finally, when negotiating the loan terms, make sure that there are no penalties for paying off the loan early or making larger or additional loan payments. This will allow you to make additional payments each month, or pay more than the required payment each month. Each month you shave off the overall number of payments that you have to make on the vehicle will decrease the amount that you pay for the vehicle overall. If you can get a loan without an early pay-off penalty, and you pay the loan off early, you can save yourself some money.
Contact a company, like Sammy's Enterprise, for more help.