Here’s what you need to know to save money on your new wheels, starting before you’ve chosen the make and model you want and taken a test drive to be sure it fits in your driveway or garage, but before you sign on the dotted line.
Check your FICO score
Before you begin to discuss financing with a dealer, bank or credit union, check your FICO score, since the better your score, the lower your interest rate is likely to be.
Check with all three major credit rating bureaus – Equfax, Experian and TransUnion – to see if there’s anything incorrect on your report that is affecting your score, and get it fixed.
By federal law, you are entitled to one FREE credit report a year from each. Checking your credit report will not hurt hour credit racing. Get a FREE credit report here.
Many buyers opt for a longer loan term, 48 or even 72 months, in favor of smaller monthly payments. Don’t do it, because the longer the loan term, the more interest you pay over the life of the loan, or financing.
Opt instead for the largest monthly payment you can afford, even if it means cutting back take-out or going out. It will cost less in the long run.
How much can you afford each month? Click here to calculate based on your monthly income
Simply, the faster you pay off the loan, the less interest you pay and the sooner you’ll be relieved of debt. Estimate monthly payments using this free auto loan calculator from Instamotor.com
You can get an auto loan from your bank or credit union, or from an outside finance company with no affiliation with a dealership of manufacturer, and it’s likely to cost you far less than buying a vehicle and financing it in the same place – the dealership.
Instamotor claims that buyers are overcharged more than $1,000 on every purchase by dealers who play games with financing charges, adding a point or more to interest charges to beef up the bottom line.
RateGenius is a nationwide, web-based vehicle refinance loan broker. With more than 150 lenders across the country, it will help you find competitive vehicle interest rate to finance or refinance cars, trucks and SUVs.
Determine the real price of the make and model you want
Before you walk into a dealership, you should know the real, fair price. There are several resources which will tell you.
My two top go-to sources for auto info are KBB and Edmunds, both of which calculate what others near you have paid for the same or similar vehicle.
Research the dealer cost, also called invoice price, of the vehicle you are interested in, not the MSRP (Manufacturer’s Suggested Retail Price).
The invoice price is what the dealer pays the manufacturer for the car, including special rebates for the dealer that are not shared with the buying public.
Knowing the invoice price will be a handy bit of information when you start to negotiate.
Edmunds also publishes dealer cost for a long list of makes and models.
Don’t get sucked in by 0% financing offers from dealers. That’s only for buyers with top credit ratings (see Check your FICO score above). If you take the bait, you’ll be switched to a higher interest rate, perhaps higher than you could get from your own bank.
Dealerships work with a number of outside lenders, and so can you. Check these two sources:
Outside Financial, which claims buyers are over-charged around $1,700 for each dealer-arranged financing package, and promises to save you that money through transparency. Outside Financial is the consumer lending arm of a bank.
Auto Find is an app-based program that gives you up to four financing offers, so you know before you walk into a dealership whether you qualify for 0% financing and other great perks and discounts for buying or leasing.
Getting the best deal on a new car isn’t easy. But it’s worth the time to do the research and save money.