EchoBay Expert: I'm applying for an auto loan at a car dealership and I don't want to be taken advantage of. What are some tips I can use to make sure I don't get a bad deal on my auto loan? Thanks.
Loyal Reader: It is easy to be overwhelmed when you are sitting in the finance manager's office at the dealership. But, as long as you are prepared, you can come out unscathed.
First, be sure to check your credit report before you go to the dealership. Inaccuracies on your report can cause the dealer to charge you a much higher interest rate on your auto loan.
Second, be sure to discuss trading your old car and buying the new car as two completely different transactions. If you make a deal based on the two cars together, it is very easy for the dealer to underpay you for your old car or overcharge you for your new car.
Third, the dealer makes a great deal of profit when they close your auto loan by adding junk fees. These could include prep fees, sales promotion fees and extended warranties. You should be able to negotiate these fees out of your loan.
Fourth, know what the value of the car is that you are purchasing. You should know the MSRP (Manufacturer's Suggested Retail Price), the invoice price, and any rebates or incentives that are being offered. Several websites offer this information including autoweb.com, car.com, autobytel.com, and carsdirect.com.
Finally, be sure that your auto loan does not contain any penalties such as a prepayment penalty. This penalty can add up to quite a fee and it applies even if you just pay a little extra on your car loan each month. Ask that it be removed if this penalty appears.