In this day and age with the price of cars being so high, not many people can walk in and pay cash for a vehicle. The dealers want you to believe that you have to finance with them, but this is because dealers make money on financing from banks or credit

Unions that they work in partnership with. Before you walk into the dealership, you want  to be armed with information so that you can finance your vehicle on your own terms.

The dealers will ask you what you want your monthly payment to be. This may make your loan last for a longer number of years in order for the loan to fit into the payments  that you want.

What you really need to focus on is the amount of money you want to borrow, the number of years you want to have a loan for, and what the interest rate is. With these three pieces of information, a simple loan calculator on Google will give you your monthly payment. Do this before stepping foot in the dealership.

I used to recommend five-year loans for my customers. With the cost of cars increasing and the lack of discounts on vehicles, sometimes people have to go to a six-year loan, which seems to be the average right now. In the rare instance that someone needs to do a seven year car loan, we will recommend it.

Look at it this way: when your car is six or seven years old you will still be making car payments on it. Do you want to be making payments on a seven year old car? Most people pause and say I never looked at it that way. A lot of people don’t want to be making car payments for seven years, especially when you start doing some maintenance that needs to be done as well.  

You want to research banks in your area, local credit unions, or any credit unions you may belong to. Check with AAA if you are a member, and your credit card companies, as they offer car loan rates too. You also want to know the terms that you want to finance. Look at all the different variables to see what works for you because some banks or credit unions will offer better rates for a five year versus a six year. Also, if you know the type of vehicle you want to buy then you want to go on the manufacturer’s website site to see if they’re running any finance incentives. Sometimes these are the best rates that you can get in the current economic market.

So before you walk into a dealership, you know what the best rates are and you have an idea of the amount you want to borrow. You will know approximately what your monthly payment will be. As stated earlier, the dealer will have you focus on the monthly payment. You will need to ask very pointed questions such as ‘What is my rate’ and ‘How many years is the loan for’? They like to avoid these conversations but it’s important you ask these questions before you sign any paperwork.

With the current lack of inventory, the dealers sometimes require that you finance through them in order to get the vehicle you want. This is one of the first questions you should ask them, if you can bring your own financing or are you required to finance through the dealership? If you are required to finance through the dealership, can they give the special rates that the manufacturer is offering? Are they marketing competitive rates from banks and credit unions in the area? Typically the
standard rates from manufacturers are the highest rate.

This is where the negotiation comes in and you need to say I’d like to bring my own financing. Here’s the rate I can get if you can match or beat it I am willing to use your financing otherwise I’d like to bring my own.  

If they want you to finance through them, check the place with the best rates and make sure they allow refinancing so you can get the car and turn around and refinance the loan as soon as you get the paperwork at no additional cost to you. The dealers will lead you to believe that you have to hold the loan for three to six months but that is only because they get the credit for the loan at that time. Typically, there are no prepayment penalties for car loans and you refinance right away.

The most important thing is to be armed with information before you walk into the dealership.