How do I negotiate the interest on a car loan to get the best rate?
I don't want to pay through the nose for my car loan. How can I negotiate the interest rate?
Many borrowers believe the myth that interest rates and other loan terms are non-negotiable. This simply isn’t true. Here are three tips to get the best rate:
First, you can improve your negotiating position by having as high a credit score as possible. This means paying down your outstanding balances, making sure your monthly payments are made on time, and clearing up any errors that might have snagged your score and pulled it down. The better your credit score, the better your rate offers will be.
Secondly, if you arrange financing through a dealer, they are usually getting a proposed interest rate from local banks or other lenders called the “buy rate.” The dealer may present you with an interest rate that’s higher than the buy rate to secure some compensation for themselves for handling the financing. This means you can negotiate the interest rate that the dealer quotes to you to get closer to the buy rate.
Thirdly, it’s always recommended to get pre-approved for a loan before you start car shopping. This way, you’ll have conditional approval for a loan with a specific amount, rate, and term. You can use this as a point of comparison for any financing offer from the dealer or another lender, and you can more confidently choose the loan that works best for you.
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