If you plan on financing or leasing your vehicle, research what financing deals (including
interest rate, duration, down payment and other costs) are available from sources
other than the dealer, such as your credit union and bank, or even over the Internet,
and get pre-approved.
1. Knowing what financing/leasing options are available is just as important
as knowing the cost of the vehicle to the dealer and the price the dealer is offering
. Remember, how the vehicle is financed, and on what terms, is a major determinant
of the overall cost of the vehicle to you, as well as the amount of profit the dealer
makes from the transaction.
2. If you can get pre-approved for financing or leasing, this will put you in
the strongest possible position to negotiate either a cash price with the dealer
(cash to the dealer from your financing company), or dealer financing/leasing that
is better than available elsewhere. If the dealer knows you have the cash available
to purchase the vehicle, they will be more likely to lower their price in order to
secure a deal right then. And if they know you do not need to rely on them for financing,
they are more likely to offer an attractive financing/leasing package.
3. But remember, just because the dealer’s monthly lease payment or finance payment
is smaller than what you found elsewhere, does not mean it is cheaper. You need
to compare interest rates and the number of monthly payments that are required, as
well as the amount of any down payment and fees required. The primary objective
in negotiating financing is to lower your overall cost of financing, not just achieve
the lowest monthly payment. And if the dealer offers you a choice between cash back
versus a lower interest rate on financing check the “Cash Back vs. Low Interest Calculator”
4. If you are considering leasing the vehicle, you need to understand not only
the interest rate, down payment, length of the lease, purchase price at end of lease,
etc., but also how many miles are included in the lease before mileage charges are
incurred, and what the mileage charges are. Do not lease a vehicle if you are likely
to go over the mileage allowance, as this can get very expensive. Also, make sure
you know how excess wear and tear charges are figured.
5. Most of all, make sure you get all the information you need to make a decision
about alternative financing or leasing sources, and be careful of deals that are
too good to be true.