Shopping for a car loan is important but that’s not all there is to a car loan. Once you have settled for the lender, then comes the question of negotiating the terms of the loan. While many people are aware that they can beat down the price for a new vehicle, not many people are aware that a car loan is negotiable. Many of the terms of a car loan are not cast in stone, which means you need to be aware of what you want in terms of the best rates and terms of the loan.
If you have taken a car loan in the past, you would probably already know that a well-negotiated car loan can be the difference between paying back on time and incurring huge debts in addition to the interests already on the loan. Below are five tips that will come in handy in your bid to get the best possible car loan terms:
Investigate What Can be Negotiated
Your ability to negotiate the price of a car and the interest rates that come with it comes as part of the process. However, knowing about other terms of the loan that can be negotiated can have a huge effect on the overall cost of your car loan. It is important you consider areas like the annual percentage and interest rate, the length of the loan and the penalties for defaulting. If possible, these areas should be negotiated to your benefit and not your detriment.
Choose a Payment Plan Wisely
A common mistake with negotiating a car loan is the temptation to focus solely on lowering the monthly payment instead of the entire loan. Focusing on lowering just the monthly payment may make you miss out on the opportunity of negotiating on lowering the entire amount, which is more important. More often than not, a lower monthly payment doesn’t translate to a lower interest. Rather, it only means an extended payment period.
Therefore, your overall aim should be on reducing the total cost, and negotiating for better terms is the first step to arriving at this. It is best to have it at the back of your mind that a lower interest rate means paying less for more. Likewise, a shorter repayment period generally reduces the overall loan cost, while a longer repayment period equals more interest on the loan.
Don’t Assume Your Lender Has Your Best Interest
It is expected that your lender will provide you with the best possible rate that you are qualified for in granting you a car loan. However, in order to get a good deal, you have to compare interest rates offered by your lender against those offered by other lending institutions.
Pay Attention to Details
It is crucial that you read the terms and conditions of the car loan over and over again before putting pen to paper. You should become suspicious if any lender pressures you into signing the paperwork with speed. A car loan agreement is an important legal agreement that should not be rushed into at best. If possible, you should consult a financial analyst to assist you with the fine print of the loan to prevent any error.
Particular attention should be paid to the cost of paying the loan early. Make sure to check that all the oral promises made to you are included in the loan document.
Make up Your Mind About Financing
The loan agreement is incomplete if you haven’t figured out how the loan will be financed. Critical details such as interest rate, down payment amount, monthly payments and length of repayment should be determined beforehand as they can’t be left to chances.
It also helps to get all the information you can about your lender. Find out testimonies about the experiences of past customers that have used the lender’s service. Online comments provide useful insights into lending services, though, they sometimes shouldn’t replace candid reviews. Rather, they should guide you.