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Top 8 Mistakes Not To Make When Negotiating An Auto Loan
By EchoBay Loans Staff Writer

1. Negotiating the car's payment not the price
This is the number one biggest mistake you can make when shopping for a car. Many times the first question the salesman will ask is what you would like your payment to be. Do not shop for a car based on payments. The dealer can make the payment whatever you need it to be. You say you can afford an auto loan for $300 a month? Voila! Here is the perfect car for you and they have made the interest rate 16% to achieve your $300 payment.
Always negotiate the price of the car and the terms of your car loan separately.

2. Going in upside-down
Once you are in an upside-down car loan, it can be difficult to get out of the cycle. By financing another car and getting deeper in debt, you will only make the situation worse. It may be as simple as selling the car privately rather than trading it in to the dealer. Many dealers will approach it as no problem and roll the additional debt into your new car loan. This doesn't concern them - they accomplished their objective by selling the car. But it will only lead to more headaches for you. If at all possible, pay down 20% when you buy a vehicle to prevent this from being a problem.

3. Negotiating after incentives
You should get the price of the car before incentives so it is clear what the dealer is offering. Any incentives, such as a rebate, should be subtracted after you have reached a final price on the car. This keeps the dealer from adding in bogus fees to your auto loan or trying to confuse you with so many calculations.

4. Not being prepared with quotes from other lenders
Before ever stepping foot on the dealer's lot, you should already have quotes from other lenders for the financing of your auto loan. This gives you more leverage in negotiations with the dealer as well as makes them be competitive on rates. You can get quotes from a variety of sources including banks and credit unions. Perhaps the easiest and most convenient place to obtain quotes is online. There are a variety of lenders online for all types of credit histories and situations. Competition is plentiful so online lenders generally offer lower rates than those not in the cyber world.

5. Not reading the fine print
Before you sign on the dotted line, make sure you read all of the fine print in your contract. All auto loan contracts contain different terms depending on the dealer and their financing sources. It is imperative that you read and understand each clause before signing. You should be especially aware of any prepayment penalties, interest rate increases based on late payments, and forfeiture of money down if you are not approved. The contract is a legally binding document and once you sign there is not a lot you can do about the terms of your auto loan.

6. Agreeing to purchase the car before loan documents are finalized
Many car buyers are anxious to take their new car home once they have decided to buy. This is just what the dealer is counting on as well. Do not agree to purchase the car before all loan documents are finalized. If the dealer says it will be a few days before they have final approval but go ahead and take the car; decline the offer. Once you have the car in your possession, it is too easy for the dealer to call and say you only qualified for a loan at a higher rate. It is much easier to turn down this offer when the car is still sitting at the lot. It is also possible to lose your down payment if you were not approved for the auto loan depending on the terms of the contract.

7. Discussing the trade-in value and new car price together
When it comes time to buy a new car and trade-in your old one, it is important to realize that these are two entirely separate transactions. You should negotiate them as such. Many believe the best way to do this is to tell the dealer you have not made a decision on what you will do with your old car (in this instance this is true!). Once you have negotiated the best deal on the new car AND have it in writing, then tell the dealer you have decided to trade your old car after all. This will force them to negotiate the deals separately.

When you look at the value of your old car and the price of the new one together, they will simply play with the values of one or the other to equal out. If they give you a great deal on the new car, they will give you less than wholesale on your old car. Or they will give you a great price for your old car and expect you to pay full MSRP for the new car. It is easy to hide this as your auto loan amount appears to be lower but you will end up paying more than you would if you had negotiated the two separately.

8. Not knowing your credit score beforehand
You should be well versed on your credit score and history before you ever enter the dealership. If you have shopped rates before you went to the lot, this should already be done. If you do not know what your credit score is, it is possible for the dealer to tell you that you only qualify for a higher interest rate loan because your credit score is too low. By knowing ahead of time what your score is, you can avoid this game.


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