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How To Beat A Car Dealer When Negotiating An Auto Loan
By EchoBay Loans Staff Writer

When it is time to buy a new car, for many the most dreaded part of the transaction is entering the finance manager's office. The finance manager is the one who decides whether you will be approved for your auto loan, what your interest rate will be and what the final price of the car will be with fees and taxes. It can be an intimidating experience if you aren't prepared beforehand. But by following a few simple tips, you can beat the car dealer when you are negotiating your auto loan.

Bring competing offers
Before you ever step foot on the dealer's lot, you should have competing offers from online lenders, banks and/or credit unions.
This gives you an edge in negotiating the car's price as well as the auto loan through the dealer. Because you have other offers, the finance manager will be forced to meet or beat the competition. Without these offers, it is too easy for the finance manager to convince you to accept a higher rate.

Don't negotiate the monthly payment
One of the first questions usually asked of a new car buyer is what do you want your payments to be. Do not answer this question! You should negotiate based on the total price of the car not based on the monthly car payment. If you say you are looking for a car payment of $250 per month, the dealer can make the car payment amount to that. But in all likelihood, he will be increasing the interest rate, extending the term of the loan or increasing the price of the car. All of these things result in more out of pocket for you. Negotiate the price of the car. You can figure out a payment schedule after the price of the car is in writing.

Don't discuss the trade-in value of your old car first
The price of your new car and the value of your trade-in are two completely separate transactions. Many dealers will try to combine them all into one as this helps to hide how much you are paying for the new car, how little they are giving you for your trade or both. It is easy to make it look like you are getting a great deal when they add in your trade and arrive at a lower loan amount. But you will be much better off financially if you force the dealer to price both separately.

Sometimes the best way to do this is to tell the dealer you do not have a trade-in, until after you have the price of the new car in writing "this actually should be true since you aren't willing to trade your old car until you have a good deal on the new car". It can also be wise not to disclose what is the payoff amount of your old auto loan. If you have a car valued at $7,500 but you tell the dealer you only owe $1,200, he will offer you much less for the car than if he believes that the value of the car and the car loan amount are very close to each other.

Avoid additional "junk" fees
When it comes down to the details of your car loan, it is easy for the dealer to start adding "junk" fees. These fees are pure profit for the dealership and you should not be paying them. These include dealer prep fees, unnecessary extended warranties, scotch guarding, pin striping and special promotional fees. Be sure these have not been added to your auto loan. It only helps the dealer by inflating the car loan amount and causing you to pay extra interest.

Be knowledgeable about your credit
It is important to always be aware of what is contained in your credit report. Your credit report can be your most important asset when you are considering an auto loan or any other kind of loan. It is wise to have your credit report in hand when you enter the dealership. Otherwise, it can be too easy for the dealer to deflate your credit score in order to justify a higher interest rate. By being knowledgeable about your credit report and your score, you can avoid this situation.

Hide your excitement about the car purchase
This may be the tip that is hardest for most to follow. It is important not to show your true feelings about the vehicle. Of course you are excited about what is about to become your new car but you must hide it from the dealer. By giving the impression that it is no big deal for you to buy today and you don't have to have that particular vehicle, you give yourself more room in negotiations. If the dealer senses you are really excited and probably won't leave without the car, he can use it to his advantage by increasing the interest rate or the fees on your auto loan or even the price of the car.

By following these tips, you can make your trip to the car dealership a little more pleasant.


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