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How to negotiate the best loan with the car dealer

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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.