When buying a new car many people tend to overlook the possibility of negotiating a lower interest rate either because they don’t think that they can or they don’t think that it is worth the time. When you are making any large purchase, like a car or a home, and you have to rely on credit or a loan to do it then chances are it is more than worth it to try and negotiate the interest rate. Even a half a point reduction in the interest rate on such a large item can save the buyer hundreds or possibly even thousands of dollars over the period of the loan. While cars tend to cost less than homes and can be paid off in a fraction of the time it is still a good idea to try to get the lowest interest rate possible when buying a car with financing.
One of the most important things to remember when negotiating the interest rate of a new car is that if the dealership that you are is will not give you the rate that you wan then you are free to take your business elsewhere. Car dealerships don’t make money if they can’t get your business and these days there are tons of car dealerships around while the number of people looking to buy a new car has steadily decreased as the economy slumped. It also helps to know what type of interest rate you should expect to get from a lender or a dealer beforehand. If you have a credit score that generally gets a 5% interest rate on a car loan but you want an interest rate of 3.5% or better unless you can come up with a legitimate reason why you should get the lower interest rate you will just be wasting your time trying to negotiate towards a position that is unreachable.
The people that tend to get the lowest interest rates when buying a new car are the ones that secure financing before they go shopping for a new car. If you can secure financing ahead of time, either with your bank or another bank, then you can prevent yourself from being put on the spot at the dealership. This will also allow you to put yourself in the driver seat when it comes to negotiating the price of the car.
The main tool you have when negotiating the interest rate for a new car is the money in your pocket. When it comes time for negotiations chances are there isn’t much you can do about your credit score or anything else to lower the interest rate but what you can do is put more money down in order to get a lower interest rate. Putting more money down towards the purchase of a car will serve to both lower the interest rate and lower your monthly payments. If you have a car to trade it the value of the car can be used in the same manner as a cash down payment and should serve to lower your interest rate.