How to Tuesday: Get the Best Deal on Your Auto Loan
April 12, 2011 by Cliff
You’ve spent hours negotiating a great price on your next car, and you’re finally ready to sign a couple papers and sit behind the wheel of your brand new vehicle. Not so fast. You’ll likely spend much more time than you were planning in the Finance and Insurance (F&I) department. For many dealerships, this department has turned into a huge money maker. If you’re not careful, you could end up spending thousands of dollars too much on your car because you let your guard down at the end of the sale.
While the F&I department often makes the dealership money through add-ons, the bulk of its profit comes from arranging financing for buyers. Often, buyers don’t realize that dealerships don’t just give them the financing that they qualify for. Instead, they often add a few percentage points to the total and keep the difference. Over the life of the loan, this difference could add up to over a thousand dollars.
It’s possible to get a great deal on an auto loan, especially if the dealer is offering a special financing rate, but you’re going to have to take two very important steps:
- Know Your Credit Score-Since the rate you receive will be based on your credit score, you should take the time request your score. You are guaranteed one free credit report each year from each of the three reporting companies – Experian, Equifax and Transunion – so this report is a great place to start. Check your credit report through a website like AnnualCreditReport.com to make sure there aren’t any mistakes or fraudulent activity.
- After making sure your credit report is correct- it’s also a good idea to request your credit score. While many websites offer your credit score for free, they eventually end up making you sign up for a subscription of $30 or more that you’ll have to cancel. Because credit scores cost money, you’ll almost always have to pay for it if you want one. We did find one site – Creditkarma.com – that currently retrieves a credit score without asking for a credit card or payment because it’s supported by ads.
- Get Pre-Approved for a Loan-After you’ve checked your credit score, it’s time to get pre-approved for a loan through a bank or credit union. First, compare loans across a variety of institutions online. When you find one that meets your needs, get pre-qualified for that bank’s loan. At this point, some institutions will issue you a check that you can fill out with the dealership’s name and car price.
When you get to the dealership with a pre-approved loan in hand, you’re free to negotiate the selling price of the car instead of the monthly payments.  Sometimes, the dealer will be able to beat the loan you just got approved for, especially if he’s running a promotion. Even if he can’t beat it, you’ll still save hundreds or even a thousand dollars more than you would have by just blindly walking into the F&I department.
Comments
2 Responses to “How to Tuesday: Get the Best Deal on Your Auto Loan”
Such a wonderful analysis! I have no clue how you wrote this post..it’d take me weeks. Well worth it though, I’d suspect. Have you considered selling banners on your blog?
Hi John,
Thank you for the great comments! Right now we want a clutter free blog
! But thank you for the suggestion.
Cheers,
Maurina Venturelli
Social Media Manager, UsedCars.com