Car dealerships offer some of the simplest ways to get a car loan. Come in to your local dealership, choose the car you want, then sit in the waiting room while your salesman wrangles to get you the best financing deal on your new car loan. However, are they really giving you the best deal on your car loan? No, probably not.
They may well get you the best lender in terms of the lowest interest for your car loan, but, what most consumers don't realize, is that the car dealers then just add an additional 2 or 3 percent to that lowest interest rate. On longer payment plans, say 48 to 60 months, this difference can come to a few thousand dollars or more that you will pay on your car loan.
There is nothing illegal about this process and many dealerships justify it as an additional way to make sure they are paying their bills. There are ways to get around these mark ups from the dealerships, however. The simplest way is to go to a bank or credit union for a car loan before you go to the dealership. While there are a few rare occasions in which dealerships will get you a lower interest on your car loan than you can get on your own, these occasions are very rare indeed.
If time is of the essence and you don't have time to go to banks to get pre-financed, you can actually negotiate your interest rate on your car loan, just like you can the price tag in the first place. This is a bit trickier than negotiating price, due to the fact that price can be dealt with by just knowing the dealer cost of a car. Interest rate can only be negotiated if you know your own credit history and know what your credit rating is. Once you know your own credit rating, you can usually figure out what the appropriate interest should be. There are many websites in existence that will help you take your credit score and figure out what the appropriate interest should be, so do your homework before you go out shopping. You will still pay a slightly higher car loan interest rate than if you had taken the time to get pre-approved by a bank before you came to the dealership, however you won't be paying nearly as much on your car loan as you would have if you had just accepted the introductory interest rate that the dealership offered you on your car loan.
