Never Get a Car Loan from a Dealership
One of the biggest mistakes you can make is going to a dealership without preapproval for an auto loan, plus other tips for buying a car.
You've saved up money and you're hoping to buy a car. Whether it's your first or not, it's an exciting experience. It's something you can call your own. But before you sign, we're sharing 5 big tips on buying a car (whether it's a new car or used car) from a dealer.
Tip #1: Don't Go to the Dealership for Financing
One of the biggest mistakes people make is not getting preapproval for a loan before going to the dealership. Dealerships are notorious for charging higher interest rates in order to handle the financing and the paperwork. It could be marked up to 2.5% more! In most cases, if you have great credit, it's better for you to get financing through the bank as you're more than likely to get a better rate. If you're still working on your credit score, financing though the dealership MIGHT be better, but this isn't a guarantee. Do your research ahead of time and get preapproval from a bank before walking into a dealership. If the dealership can give you a better rate, you can always go with the dealership, but you don't want to feel like you're left with no choice.
Tip #2: There's Always Room for Negotiation
People think that the price they see at the dealership is the price they have to pay. Think of it as a starting off point. Dealerships also tack on additional fees and costs to the list price too, some of which are really an excuse to charge you more money. Have you ever looked at the line by line of charges when buying a car? There's a documentation fee they charge for printing and putting together the sales contract. Look up whether your state limits documentation fees. New Jersey, for example, does not. That means that dealerships can charge whatever they want - the average documentation fee a dealership charges is around $350, but can even be as high as $950. When negotiating, ask the dealership for the out-the-door cost or all-in cost. This will include any fees and taxes you need to pay on top of the list price. Once you have that figure, you're better prepared to negotiate the price you want and won't be surprised with any additional charges.
Tip #3: Be Prepared to Walk Away
Yes, this is scary. You need a car, absolutely need it. You can't walk away, can you? You can and you should. You never want to come off like you're desperate or you need the car now, as the salesperson will sense they have the upper hand. When asked why we are looking to get a car, we always respond with "We're just looking. We have a car and it's nice, but we might be willing to upgrade if we see something we like." It signals that there's no rush to us looking, even though our last car is totaled and we absolutely need a car. And when the salesperson just won't budge, we've told them the all-in price we're willing to pay, written it down on a business card with our contact information and walked out. Sometimes, they catch us before we walk out and will meet our price. Other times, we walk ou