To most people, buying a car is a substantial investment they can hardly afford without a loan. It, therefore, makes sense to secure the most affordable loan with the best terms you can get. This involves negotiating with your lender before getting into a binding agreement.
Your goal is to get a low-interest rate on your car loan. Below are seven tips that can help you negotiate effectively and a get a lower interest rate on a car loan:
1. Ensure You Have a Good Credit Record
Having a good credit score gives you access to reasonably low-interest rates on car loans. It is very difficult to get a good interest rate on poor credit or bad credit. However, being on the negative side of the scale does not mean all hope is lost. Taking corrective measures to improve your credit report will fix problems encountered when looking for a car loan. One way to improve your credit report is by paying your bills in full and on time.
2. Find a Consigner for Your Car Loan
A poor credit score does not have to deny you the opportunity of driving a new car. If your credit score is poor, you can seek a family member or trusted friend to cosign the car loan for you. This is the best option if you need a car urgently and you don’t have time to wait for your credit score to improve. Using a consigner helps you get a lower interest rate since it is their good credit score a lender will rely on to approve your car loan. It is however important you keep your word and pay the loan in full and on time to avoid punishing your consigner.
3. Bargain the Car Price
Never accept the listed price on a car without trying to push for a lower price. If you successfully bargain for a low sale price, you might secure a low-interest rate that small loans attract. To negotiate for the lowest possible car price, visit other dealers for reasonable counter-offers you can present to your preferred dealer. Some dealers will match car prices from other dealers as long as you can prove they are willing to sell the same car at a lower price.
4. Research Available Interest Rates
A well-informed buyer reviews current interest rates to negotiate effectively. Appropriate knowledge of the lender’s interest rates helps you leverage on the best local lender with the lowest rates. Moreover, enquiring about the yearly percentage rate, known as Annual Percentage Rate (APR), helps you determine the total annual cost of your loan.
5. Avoid Loans with High-Interest Rates
If your credit report is bad, you can be certain your interest rates on loans are going to be extremely high. On the contrary, if you have an outstanding credit score, you are guaranteed a low APR on a car loan. Stay away from loans with interest rates exceeding 13% APR. Such a loan will cost you dearly.
6. Go for Short-Term Loans
Avoiding long-term loans on a car is vital. Short-term loans help you save a lot of money. While lower monthly payments are easy on you, they attract higher interest rates and are costlier in the long run. Ideally, choose to pay your car loan within the shortest time possible.
7. Choose In-House Financing Where Necessary
If you have a bad credit score that can deny you an opportunity to buy a car on loan, consider in-house financing. This allows customers to secure a loan by adjusting the loan terms. The latter ensures the risks presented by the borrower are circumvented. In addition, the loans offered through in-house financing come with flexible terms that are ideal for everyone.