Personal Finance Advice

It’s quite common nowadays to use a loan when purchasing a car, regardless of if the car is new or used.  It’s a rarity to see someone walk onto a car lot with an envelope full of cash, prepared to buy a car.  Since car buyers are oftentimes also shopping for a loan, many car dealerships try their best to compel buyers to also get financing through them.

Should you get a loan at the dealership? It depends.  The important thing is to make sure you keep the transactions separate.  Buying a car and getting the loan should not be one single transaction, but should instead involve two completely different things:

1.  Choosing and negotiating the price of the car you want.

2.  Getting the best loan product possible.

Although most financial experts suggest that the best way to get a great deal on a car loan is to get preapproved by a bank or credit union before ever walking onto the lot, this isn’t always the best way to get a fantastic interest rate.  Yes, you want to walk onto the car lot with a preapproval in place from your preferred financial institution, but inevitably the dealership representative is going to ask for your social security number so a credit check can be pulled in case they may be able to offer you a lower interest rate.  If you have an excellent credit rating then there is indeed a chance that the dealership may actually be able to get a better loan for you.

In fact, some dealerships offer loan products that are incredibly attractive, especially for new cars. 

Here is what you need to remember: Even though the process of buying a car can be quite exciting, you still need to take the time to read all the loan terms and conditions to make sure you aren’t getting stuck with a bad loan.  A low interest rate is great, but you want to avoid prepayment penalties and other fees that might wind up costing you more money in the long run.

Remember to keep the transactions separate.  Just like you should tediously shop for the best car deal you should also exert plenty of energy getting the best financing.  Here is what you should do:

1.  Find a car loan with the lowest interest rate and best terms available.

2.  Get preapproved for the car loan and walk onto the dealership with the check in hand.

3.  Allow the dealership to run a credit application to see if they can get you a better loan product.

4.  If the dealership offers you a lower interest rate, review the documents thoroughly before accepting the loan.

Happy driving!