How to save when financing through a dealership

When you apply for a car loan at a dealership, they will buy your application from lenders in their network to find a match. You can also arrange financing yourself through a bank, credit union, or online lender. If you decide dealer-assisted financing is more convenient or want to take advantage of an incentive they offer, there are steps you can take to ensure you get the best car loan deal.

4 ways to save when financing your car through a dealership

Buying a new car can be stressful and getting a car loan with competitive terms can be tricky if you’re short on time. Fortunately, there are ways to save when financing your car through a dealership.

1. Increase the deposit

Low-interest car loans are usually given to car buyers with good or excellent credit. However, this is not the only way to get a good deal. You can also offer a higher deposit to minimize the risk the lender will assume in financing the car for you. Plus, you’ll save on interest over the term of the loan since you’ll be financing a lower amount.

2. Shop the price at the door

Some car salespeople focus on the monthly payment rather than the purchase price to convince eager buyers to close the deal. But here’s the thing: a low monthly payment probably means you’ll get an extended loan term, and the lender will have several years to collect interest from you, unless you pay off the loan sooner. So you want to focus on the door price to avoid this.

3. Be ready to go

Even if you fall in love with a car, you have to be ready to go if the numbers don’t suit you. By sticking to your guns, you might also find that the dealer is willing to go back to the drawing board to negotiate a better deal with you.

4. Use quotes from lenders to negotiate

If you’ve been pre-approved for a car loan with a better rate through your bank, credit union, or online lender, the dealership might be willing to match it. And in some cases, they will offer you a slightly lower rate to earn your business.

When to ignore dealer financing

Although convenient, dealer financing is not always the best option. If you have bad credit or a high debt-to-equity ratio, you’re more likely to get a lower interest rate from a credit union or bank than with dealer-arranged financing.

Or maybe you’re at the dealership and they can’t match an offer you received from your lender. In this case, it’s also a good idea to skip dealer financing to save money, even if the dealer offers a lower monthly payment. Remember that you will pay more interest if they stretch the loan over an extended period.

Another reason to seek a loan elsewhere is a pushy dealer. While it’s essential that they make the sale and secure your financing to achieve your goals, they should also be willing to give you some time to get a quote from your bank. If they won’t grant you that request, that’s your sign to move on.

Next steps

Buying a car is a major investment and you want to take all the necessary steps to get the best financing deal. It is possible to save money if you choose to obtain a loan through the dealership. However, certain circumstances would encourage you to look elsewhere. Ideally, you want a car loan with a low interest rate, low fees, and a monthly payment that fits your budget, no matter what route you take to obtain financing.