How to negotiate the best loan
with the car dealer
By Stephen
Rothman • Bankrate.com
It doesn't take a rocket scientist to get a
good car loan through a dealer, but it does take some preparation,
says Joseph Moran, senior vice president of Detroit-based Comerica
Bank's national dealer services, which loans money to car dealers.
If the buyer is "willing to ask
a few questions in advance of making the deal, it's pretty easy
to avoid getting burned," adds Art Spinella, vice president of CNW
Market Research of Bandin, Ore. Remember, he says, the answers to
these questions are covered by federal Truth In Lending laws, so
the dealer must provide the answers.
Here is what the car shopper needs
to know.
Before going to the dealer
- Decide on the car model plus features such as air conditioning,
AM/FM stereo etc., and obtain the manufacturer's suggested list
price. It's now available at many Web sites offering car price
comparisons.
- Decide how long you want to carry the loan.
- Check the interest rate on a loan offered for that amount of
money, for the desired number of years, with the bank or credi
union.
- Fill out the credit union or bank's application to see if its
credit is sufficient to qualify for a loan at that interest rate.
- Ask if there is any loan origination fee that would have to
be paid as part of the deal.
At the dealer
- Give the dealer the description of the car and add-ons that
were part of the estimate given to the bank or credit union.
- Ask for the interest rate on that amount of money for the same
loan length given the bank.
- Tell the dealer that the bank or credit union offered a lower
interest rate and wait for a counter offer, which will generally
happen because the dealer wants to sell the car.
- Ask for the bottom line: the total of interest and principle
that must be paid over the life of the loan.
- See if there is any pre-payment penalty if the loan is paid
off early.
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