I’m not sure if there is a more cliché character than a sleazy used car salesman. I personally have owned 6 cars in my lifetime, 4 of which were bought and financed from a dealership. Each and every time I went shopping, I absolutely dreaded setting foot on the lot for the fear of being poached! It’s one thing to get a fair price on the car that you’re buying, but where the dealership makes their money is on the loan that you sign up for. I know this from experience; let’s just say that one of my cars had a 50% interest rate! 50%! How is that possible you may ask… I obviously was young and naive and had no idea what I was signing. That said, I now know what to ask for and when to run for the hills, which is exactly what I’m going to share with you today.

The Proof is in the Numbers

According to Statistic Brain, the average auto loan (taking into consideration new and used) is just about $18,000 with an interest rate of 4.16%. The average length of loan is 5 years. Do the math, and on an $18,000 car, you’ll end up paying $25,488 by the time those five years are up! This is why you need to come prepared with your big kid boots on and ready to negotiate.

The Top 4 Things to Prepare Before Heading to the Car Lot

  • The absolute best thing you can do before heading to the car lot is to research and have your expectations set ahead of time. Have a car in mind? Check Kelly Blue Book to find out the value of the car that you’re interested in, and then pull up sites such as AutoTrader, CarSoup, or CarFax to see what the going rates are for comparable vehicles. This will give you a great leverage piece when negotiating price.
  • Another thing to research are interest rates. Obviously your credit will come into play here, but find out what the industry averages are by going to a couple of bank websites. Most of that data is published with a disclaimer that the loan rate would be dependent on your credit score. Don’t know your credit score? With Credit Sesame, you can get your credit score and monitoring for free. They also provide options to save you money based on your credit profile and financial goals.
  • Lower the price of your car by paying the biggest down payment that you can. This may mean a little extra time and effort from your part before getting your new car, but trust me, it will be well worth it in the long run since your loan payment (and interest accrual) will be less.
  • Research auto loans on your own first. Sure, dealerships will get a kickback on the loan if you go through their lender, but that is not the only option! Whether you’re buying from a dealership or from a personal seller, do your research and find the best loan that you can. There are multiple resources on the internet to help get you started whether it be from a bank or to a company that is dedicated solely to auto loans such as Auto Avenue. A major perk of going through an auto financing site such as this one is that they have financing for everyone, and you can even get a car with no down payment if you’re in a pinch.

Lastly, I want you to practice something with me. Say these words out loud: “That’s not good enough.” There is so much negotiating value with these words; remember, dealerships and private sellers want to get rid of these cars. You are the one with the power here and it’s important to keep that perspective! If all else fails, never underestimate the power of walking away. There will always be other cars!