Even with today’s economy somersaulting in many directions, getting a new car loan is still on some people’s list of things to do this year. It may be for necessity, a growing family, or a son or daughter off to college, but whatever the reason, the opportunity to obtain a fair loan is more on your side, the consumer, than the financial institutions that want your business.
There are ways to ensure you are getting a good deal. First, get a copy of your credit report before you buy. You don’t have to join one of those sites that make you pay high fees for that report either. The Federal Trade Commission mandates that the credit bureaus give everyone a copy of their credit report upon request annually. Your credit report provides information from all three credit bureaus, Experian, TransUnion, and Equifax. Once armed with your score, you have a big advantage when seeking that new car loan.
If your credit score is anywhere from 680-800 plus, don’t let any dealer give you an unfair rate because your score lands you in what is considered a good to excellent credit risk by both aftermarket lenders and dealer lenders. How do you tell if the rate is unfair? Call any bank before you get to the dealer and ask what the going prime rate is and go from there. If prime rate is seven percent, for example, and they’re offering nine percent, they are making what the industry calls “points” off your loan. What this means is that their buy rate is seven percent, you’re paying nine percent and dealer is getting paid to “bump” that loan to that higher rate meaning you lose by paying excessive interest on the total loan. Your best bet for a prime interest rate loan is your bank or a credit union – if you don’t belong to a credit union, join one.
Also, watch out for fees a dealer mentions that are negotiable like documentary fees, loan processing fees, application fees or title fees. Many dealers put these in your new car loan without even disclosing what they mean, so ask. If they mention any of these, tell them you feel more comfortable going to the next dealer – they’ll negotiate or drop the fees. With the pressure the auto manufacturers are placing on their dealers to get rid of inventory, at any cost, you sit in the best position, so take advantage of it.
Dealers also want to hide rebates and incentives from you if they can. Why? Because that money goes into their bottom line if they can keep it. A typical dealer on say a hard to get rid of last year’s model SUV, may have a manufacturer rebate of $3,000 that they disclose, but beyond that, the manufacturer may have other incentives for the dealer to rid themselves of that vehicle – in some cases, large amounts as high as $5,000-$6000. Ask if there are any back-end rebates they can give you. If they say no – walk, the next dealer will do it just to get rid of the vehicle so they can stop paying flooring, interest, and insurance on the vehicle.
Ask to see the dealer’s invoice. While many websites out there tell you that you can download and print out “exact” dealer invoices, this is not always true. What those invoices don’t show are destinations fees, holdback fees, or advertising fees that vary from region to region and state to state, so it’s impossible for anyone to know what they are – only the dealer knows. You can quickly identify these amounts and how they are built into the vehicle invoice. Holdback is concealed at “HB,” the destination charge is clearly marked and the advertising fees may have some acronyms like DAA or PAA and then the number the dealer is charged.
If you’re seeking a new car loan, you hold the cards so be willing to make a day or two out of the adventure to find the best deal. Remember, if one place isn’t giving you the deal you want, the next place will so keep shopping until you get what you want and on your terms.