Negotiating a car loan can be a daunting experience, even for the most confident people amongst us. As soon as we go head-to-head with a negotiating specialist who deals with people on a daily basis trying to haggle for the best rate possible, all of our bluff and bravado goes to water. Let’s face it, you’re probably not a mechanic and chances are you’re not a car loan broker either, so how will you truly know whether you’re getting a good deal on the vehicle you want? You’ll have questions swishing and swirling around in your mind like a load of dirty clothes in the washing machine, and that will cast considerable doubt about whether you’re getting a fair deal.
But it doesn’t have to be that way. With nothing more than a small time commitment, crystal clear focus and a deep breath, it’s not that difficult to find a great loan that ticks all of your boxes. While you might have to look elsewhere for advice on whether the car you’re buying is a lemon or not, here are six tips to ensure you won’t get screwed on the loan!
Find out where you stand
Get a copy of your credit score and soak in the reality of where that leaves you standing. By understanding what your current credit position is in the eyes of financial institutions, you’ll soon comprehend what sort of loan you might be looking at. A good credit score and you’ll be in a position of strength to negotiate for the best interest rates; a bad credit score and you may have to grin and bare a higher interest rate for 12 months at least, before re-negotiating the rate once you’ve proven how reliable you are. You can get a free credit card report from online companies such as Veda, Get Credit Score and My Credit File.
How much can you afford?
Now is not the time to be too vain, or too proud. Financial stress is an uncomfortable existence no matter how old or experienced you are. The moment you lock yourself into a loan that will be tough to service, is the moment you’ll feel pressure from a loan you can’t really afford. Take the time to create an accurate monthly budget, and work out how much additional disposable income you have to repay the loan, and pay for expenses that come with owning a car, i.e. insurance, petrol and servicing. Once you’ve got a rough idea of how much money you can realistically afford to repay each month, use an online car loan calculator to see how much you can borrow. This will set the parameters for the kind of car you should be looking at buying.
Save up a deposit
Delaying your car purchase is a good idea for a number of reasons, especially if you’ve got a bad credit score. Firstly it will demonstrate your ability to set money aside for your car which will come in handy when negotiating your car loan interest rate; and secondly it means you can borrow less which will reduce your monthly repayments. A short waiting period while you save will give you time to get clarity about the car you really want to buy and how much you want to spend. A spur of the moment decision on the other hand can lead to years of financial stress and pain.
Research the market
You’re almost ready to speak to a car loan provider, but there’s one last critical step you must perform. Bust out the laptop, Google ‘car loan comparison websites’ and research what products are on the market. Unless you fully understand what interest rates are being offered, and the terms and conditions they come with, you simply won’t have a leg to stand on during the negotiation process. So while this might not be the most glamorous aspect of the process, it’s arguably the most important.
Get some help
For some people, even after doing all of the work required to get themselves prepared, negotiating on such a critical contractual agreement just isn’t for them. It’s at this point you should seek the help of an expert in the field to do your bidding for you. A car loan broker will be able to source the best product for you given your particular set of circumstances, and negotiate the best possible rate. The best car loan brokers will have excellent relationships with many car finance companies and should be able to get interest rates, as well as terms and conditions, that might not be available to the general public. And the best part is it won’t cost you a cent to use a car loan broker, because they make their money from the banks and financial institutions offering you a loan. So you really have nothing to lose if negotiating isn’t for you.
If you’ve decided to do the negotiating yourself, then you should be prepared and ready for action by now. The goal of any negotiation is for both parties to leave happy with the outcome, after all you’re in this contractual agreement together for the next 2-7 years. To get the deal you want, you have to be calm and respectful of the person on the other end of the line. If you’re not getting the deal you want and decide that flipping out is the best course of action, expect the conversation to end pretty quickly with the dial tone ringing in your ear. Instead, if you can’t agree on a car loan within the repayment and interest rate parameters you should have set for yourself before making the call, politely thank them for your time, hang up the phone and dial the next lender. Don’t let emotion get in the way of your goal, otherwise you’ll end up with a loan you can’t afford.
P.S – It’s a good idea to let them know you’re shopping around and have received an offer or two. Make sure you know what other lenders are offering otherwise your bluff might be called, but at the end of the day they want your business and might be prepared to give an inch or two if they think you might be ready to sign with someone else.
You’ve found a great deal within your means, what next?
Congratulations, you’ve kept your cool and received an offer that suits your financial situation. Don’t sign anything until you’ve read the agreement from cover to cover and done the maths to make sure all of the figures add up. Once you sign a contract and send it in, it’s very difficult to go back and ask for changes to be made, or argue that a mistake has been made. This part is even less sexy than doing the market research before entering into negotiations, but if you find a few hidden fees and charges that you didn’t know about, it could save you hundreds, if not thousands of dollars.
Now it’s over to you. The more information you have at hand before calling a car loan lender, the more prepared you’ll be. And the more prepared you are, the more confident you’ll be to negotiate hard (but fair) for the deal you want. Just remember, being under financial stress for the life of the loan is not fun, so work within your means and enjoy having a new set of wheels to get around in.