How to Negotiate Car Interest Rates

Perhaps it's time to shop for a new car but you don't want to pay more than you have to. Besides the cost of the car itself, you also should be concerned with the interest rate if you plan to finance it. Most car dealers will provide you financing, and you can also approach your own bank or credit union for a car loan. Both sources will charge the most interest they can, so it's up to you to negotiate the best rate.

Instructions

1

Research the average rate for car loans in your area. Then figure out the amount your down payment will be, and determine what length you want for a loan. Stop first at your bank or credit union and find out the interest on the loan you're about to apply for.

2

Negotiate the purchase price of your car without mentioning either the down payment, the car you'd like to trade in, or that you would like a loan. Car dealers are notorious for lumping those elements together, and that can lead to confusion. Once you are satisfied with the price for the new car, mention that you have a trade-in, plan on making a down payment and plan on taking out a loan.

3

Negotiate your loan with the dealer. Agree on the amount you'd like to finance and the term of the loan. Ask him if there is an origination fee and about the interest on the loan, and if there is a penalty for paying off the loan early. If the interest rate is higher than you can get at your bank or credit union, ask him if he will go lower. The interest rate that he quotes first ordinarily includes a healthy profit for the dealership, and there is room for negotiation. The bottom line is that the dealer wants to sell you a car.

4

Return to your bank or credit union if the dealer's interest rate is higher. Be aware, however, that a bank or credit union loan generally is more difficult to get than one made by a dealer. If you have less than acceptable credit, it may make more sense to get the loan from a dealership, even though the interest is higher.