For some, purchasing a new car is an exciting experience filled with brand new options aplenty and very little concern about finances. For the majority of Americans, however, that is not quite the case — especially if they do not boast an excellent credit score.
Having a low credit score can cause significant setbacks in one’s life, especially when it comes time to apply for a mortgage or car loan. Those who find themselves in this position are often taken advantage of by slick car dealers. Although these buyers may end up purchasing their dream car in the end, they will not do so without paying a hefty price — which, in this case, comes in the form of a long-term, high-interest loan.
If you fit this description, be sure to save yourself some trouble and follow these steps to get the best deal on a new car:
Know your numbers. This step encompasses many sub-steps, including: setting and sticking to a budget, researching common interest rates for your specific credit score, researching various loans, and comparing loan offers from different financial institutions — such as local, regional, and national branches. By thoroughly preparing yourself and knowing the options available to you, you will lower your risk of being swindled by a dealer with ulterior motives.
Negotiate the best possible deal. There is no law that states you cannot haggle with your car dealer. In fact, it should be encouraged that you do exactly that, as it is already known that not all dealers are trustworthy. In an article for Forbes, Jim Gorzelany suggested that you “make your first offer the vehicle’s invoice price, including any options or packages and the automaker’s mandatory destination charge.”
Depending on your dealer’s counter-offer, this process may go on for a while. However, if you are successful in your endeavors, you will be thankful you were patient and perseverant — especially when it comes time to make your first loan payment.
Choose the shortest loan term possible. While it may be tempting to settle for a 60-month loan and pay less per month, it would be more beneficial to choose a 48-month — or lower — loan term. Although you will be paying more monthly, you will end up paying less in the long run, as your balance would not accrue as much interest as it would if the loan remained active for another 12 months.
Once you have reached the end of this process, congratulations! You are likely the owner of a new car. Just remain diligent until after the contract is signed — you do not want to unknowingly agree to paying any unnecessary charges.