Save Thousands On Your Car Purchase Part 1
written by Credit-HQ ExpertHow does the prospect of saving several thousand dollars on your next car purchase appeal to you? Sounds incredible, but simply following the tips listed below can actually pave the way to savings in thousands of dollars.
Check your credit score beforehand. The financing packages you’ll qualify for largely depend on your credit score. This is why to get leverage during the bargaining process at the dealership, you have to get hold of your credit report way before you actually shop for a car.
For less than $50, you can get a comprehensive report on all three credit bureaus (Experian, Equifax, and TransUnion). It’s important to get reports from all three as you wouldn’t know which one the lender would be basing the financing scheme on.
You will get the most favorable loan rates if your score falls between 750 and 800, but if your score isn’t high enough, it’s best to defer your purchase for a few months until you can improve your score considerably.
Shop online and use your phone. Knowledge is power, and you can get it for free by surfing the Net. Instead of taking the auto dealer’s word that theirs is the best price in town, listen to him sing a different tune if you walk into the dealership with an Excel list in hand of price quotes from different sellers.
It’s also a good place to look for auto lenders, who offer lower rates than car dealers. Many online auto lenders provide calculators which you can use for free to compute possible rates you can get based on your present credit score.
Once you come across an online lender you feel comfortable with, start filling in an application form and wait for the approval to arrive in the mail. You’ll then receive a check that you can make out to the company or person selling the vehicle. It’s likely that a price range would be specified by the lender, so you must negotiate further with the seller or car dealer if you can. If the sale isn’t consummated, then you can simply get rid of the check.
Haggle. Yes, haggling isn’t only for flea markets. A lot of discounts can be obtained at the dealership if you do your homework well. For those uncomfortable with negotiating, check out the car’s sticker price or MSRP via www.kbb.com, a valuable resource for checking out prices of new and used cars of almost all models and makes. When the sales agent realizes you’re well-informed, he’ll be discouraged from padding the price tag.
Studies show that women are more vulnerable to sales pressure tactics, and because they’re generally less knowledgeable about cars, they’re more often taken advantage of in situations like these than men. Take a male friend or someone who knows cars like the palm of his hand, and get that bias out of the way!
Based on these three simple tips, let’s now see if you can actually save more than just chump change on your car purchase:
Let’s say for example you have your heart set on a $13,000 sedan. If your credit card score is 700 and you select a paying period of 5 years, you’ll be given an APR of about 9%, bringing your monthly amortization to $270. That’s $16,200 in total costs.
Now, if you took the time to improve your credit score a tad to raise it to above 750, then you could just qualify for an APR of about 7%, which reduces your monthly payment to $257, and your total interest to $2,445 – resulting in total costs of $15,420. That’s already a savings of almost $800.
Next, try to reduce the APR even further by looking for an online lender. Your improved credit score rating could get you 5% APR if you’re lucky, bringing the monthly payment down to $245, giving you a total of $1500 in savings from your original figure.
If you could get yourself to negotiate with the sales agent, you could probably still get a $500-$1,000 discount, and if you could pay a thousand dollars or more upfront as down payment, then the dollars saved could well amount to more than $2,000.
Click here to see Part 2: Save Thousands On Your Car Purchase Part 2
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