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Have you finally decided to get a car? Cool. You have found the perfect car. The mark is correct, colors are obvious and everything feels right … But now the last thing remains: Write on the papers. In many cases, if you do not have the financing ready before you reach the car dealer, you may need to sign on the car dealer’s terms.
The seller will definitely try to sell you insurance, security packages, extra service, the more expensive sound system and so on. It is just as well to prepare for additional sales immediately. In this short article, I will discuss a few tips on how to negotiate an advantageous car loan.
How to negotiate the best deal:
- Always negotiate the price
It may sound simple, but once you sit at the table, it’s harder. One trick car dealers use is to discuss financing and installments on the car.
They want to set up an installment plan that is as close to your maximum amount as possible. Instead of negotiating financing, negotiate the actual price of the car.
- Try to keep any installments as short as possible
Modern car salesmen have learned to reduce the monthly cost by postponing the installment for a longer period of time. It looks better, if you consider the monthly cost, but the car loan will be larger and more interest will be paid in the long run. As a result, the car becomes more expensive.
Most cars are a pure loss-making business. Cars lose value every year, and it is said that up to 15% of the value disappears as soon as you drive out of the parking lot. An optimal car loan is 4 years or less. Max 5 years.
If the loan is over 60 months, the risk is great that the loan is far too large in relation to the car’s value after 5 years. Then you can no longer sell the car to cover the loan anymore.
- Skip “the little extra”
Additional sales are the car dealer’s biggest dream, and also the biggest cash cow. Everything from extra insurance, extra rust protection, extended warranty and various service agreements. A lot of this sounds good. However, the seller’s margins are large, and here they make the money. Many of these will never be used, and only cost a lot of money. If you need extra warranty, rust protection or a car alarm, there are cheaper alternatives on the second-hand market.
A car insurance where you have your regular home insurance can give you a better price, because you collect the insurance with the same supplier
- Say no to high interest rates
Your credit rating can determine your interest rate. Just because your credit rating is limited does not mean you have to take the first best loan with a high interest rate. If you have a very good credit rating, you can get an interest rate below 10%. If you have a good credit rating, you can get 10-12%.
If you have a bad credit rating, the loan can be as high as 15% in interest or more. I have seen loans as high as 20% on a car. It’s completely crazy, never accept a car loan with such a high interest rate. Rather buy another car instead. It is unnecessary to spend so much on interest on a car, which loses value every year.
- Keep the emotions out
Buying a car is an emotional decision. After testing your dream car, with the fresh smell of new cars, it can be difficult to leave. Should the car dealer not want to negotiate, it is best to go to the next dealer.
They do you no good by selling you the car, you are the one who has to pay for the vehicle. Don’t let the emotions tie you up on an unfavorable car loan you don’t need. Think twice before signing up.
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