By manybanking.com Staff
When shopping for a new car, how you finance your auto loan can make a big difference in how much you end up paying in the end. Auto loans are highly negotiable, so buyers have the opportunity to save money if they come prepared.
Before you go to the dealership, here are 5 things you should have ready and with you:
Identifying Information: If you get a loan from the dealership, you’ll have to prove your identity. Your driver’s license is usually enough. You’ll have to provide your name, address and date of birth as well as your social security number.
Employment and Salary Information: To qualify for a loan, you may have to prove that you are employed and make enough money to afford the monthly payments. In the past, stated income and employment status was usually sufficient, but with the ongoing credit crunch, most lenders are now requiring more documentation. You may also need to have your past year’s tax returns or a few months of pay stubs as well. Additionally, you may need to provide a bank statement to show that you have ample savings to cover your payments if you do lose your job in the future.
Credit Score: Once you apply for a loan, the lender will check your credit report, but it’s helpful to already know your credit score. Lenders use your score to determine what interest rate you will get, but an auto lender (or salesperson operating on the lender’s behalf) doesn’t have to tell you what your FICO score is. If you don’t know your score ahead of time, you most likely will not be in the best position to negotiate the interest rate.
Market Research: Before you inquire about an auto loan on a specific vehicle, it’s crucial to investigate what that vehicle is actually worth. You can use the online version of the Kelley Blue Book to research car values for both new and used cars. Take print outs of your market analysis to your loan negotiations. Negotiate up from the invoice price, not down from the MSRP.
Information on Promotions: In addition, to the car’s value, investigate any ongoing promotions. Often there are manufacturer specials available for you to take advantage of. If you’re not in the loop on the specials, be aware that the salesperson may present it as a special deal for you to dissuade you from negotiating other points. With most manufacturer specials, such as a special low interest rate for approved buyers, you can also negotiate the sales price down to achieve more savings.
Financing through the dealership is not your only option. In many cases, you can actually do better if you choose outside financing. Outside financing allows you to be a “cash buyer” at the dealership and negotiate only on the price. To apply for outside auto financing you also need to provide your identifying information like your name, address, date of birth and social security number. Employment and salary history is also necessary. With some lenders, you can even apply online.
To compare auto loan rate, consult the Auto Loan Section at manybanking.com.
—For more ways to save, spend, invest and borrow, visit MainStreet.com.