Auto loan at a dealer, what should you watch?

Auto loan at a dealer, what should you watch?

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Choosing a new or used car from a dealership is the most common purchase. You can indeed negotiate the options of the vehicle as you wish and you can do the same for the car loan if you want to benefit from the correct rates.

Why go to a car dealership rather than a bank or consumer credit organization? What are the pitfalls to avoid ?

The advantages of choosing a car loan from a dealer

Entering a car loan from a dealer is the simplest solution. At the same time as the conclusion of the purchase of the vehicle, you buy the credit to finance it and you have no additional steps to perform.

As a result, if you have found a model of car that you like, dealers automatically offer auto credits that can sometimes be very interesting. Taking out a loan at the same time you buy your vehicle is an additional opportunity to negotiate better. Do not be afraid to get into trading. This process is very common among dealerships and represents a noble art.

You are indeed in a position of strength because you represent a privileged customer for the dealer who would be wrong to refuse you a reduction at the risk of running away. The prices are really competitive, the credits are easy to get directly at the point of sale and this system is an option increasingly popular with car buyers.

To make his sale a reality, the seller has an impressive service and great business arguments. The dealer has a strong interest in selling its cars with the credit it offers because for the company, the operation builds customer loyalty and for the seller, it allows him to improve its turnover.

Thus, it is always possible to find a new vehicle without paying full price. You can have a discount of up to 5% of the manufacturer price on the new models that have just been released. As for the less recent cars, you can negotiate them more easily, whose reduction can go up to 20% according to the reputation of the marks.

By buying a vehicle from a dealership, you will be more likely to get a discount on a model already in store than on order.

Between storage costs, lack of space and the fact that getting rid of the vehicle sometimes becomes a priority, the dealers do not hesitate to grant a larger discount, provided they do not look at the color or the options. And this is especially true when you take out a car loan directly from his services.

It is the same if you are interested in a used car at zero kilometer. These new vehicles are already registered demonstration models and they have less than 100 kilometers on the clock. You have the opportunity here to negotiate the car hoping to reach 25% discount.

The car pack

By purchasing your new vehicle, you can opt for an all-in-one deal. Simple, effective and truly practical, the car pack will save you time and money.

This concept is increasingly practiced, especially for used vehicles, and comes in different forms. However, the car pack incorporates most of the time the car credit, vehicle damage insurance, assistance, maintenance and extended warranty manufacturer.

Through these packaged formulas, you can benefit from a lower credit rate or a discount on insurance. All these contracts are underwritten at one time and you have the advantage of having only one and only monthly payment to repay your car loan.

However, there is no standard packaged offer and the benefits differ from pack to pack. Before making your choice, carefully check what is included in the all-in-one package to avoid unpleasant surprises.

Do not buy a car pack if it contains a service that you do not want or that you will not use because you will pay anyway, and this will represent an additional cost.

The balloon credit

If you do not want to commit to the long term, this solution allows you to acquire a vehicle without resorting to conventional car credit. All dealers can distribute a balloon credit which is a fine credit specially designed for the purchase of a vehicle.

This credit is not amortized over time and must be repaid in full as soon as it expires. You sign a vehicle purchase agreement whereby the seller agrees to buy your car at a pre-determined date and price simply in case you wish to separate from it. The balloon credit can be established over periods ranging from 12 to 48 months.

The longer the duration, the lower the monthly payment. A mileage package is also specified in the subscription agreement. The balloon credit is granted in addition to a personal contribution up to 15% of the price of the vehicle.

So at the end of the contract, you can decide to buy cash at a predetermined price by paying the purchase option or rather choose to return the vehicle to the dealer who pays the purchase option, or sell the car yourself and pay the financing or renew the lease. This type of credit allows you to repay when you want, whether partially or totally.

If you repay partially, the monthly payments or the repayment period decrease. However, subscribing to a balloon credit forces you to pay fairly high interest all the time you will have your car without ever paying back the principal.

You must know that at the end of the contract, you will have to start from scratch because you will not benefit from the contribution of the resale of your old car. This credit is interesting only for people who change car very often who are still looking to ride in new cars.

Be wary of prices

While it may be easier to buy a car loan from your dealer, it is strongly advised to compare prices at the time of the order and to make auto credit simulations on our site to choose the most advantageous.

The cost of the credit offers offered by the financial subsidiaries of the dealers is not always in your favor, with notable exceptions during the promotion period. Their financial partners often provide them with attractive terms and concessionaires will not necessarily be able to improve these already predefined terms.

You will then encounter great difficulties to negotiate the credit but nothing prevents you from carrying negotiations on the vehicle, including its price and options. If the offers are often standard, the seller will still have a significant margin of maneuver to make you a discount on the car.

The dealer having objectives to achieve, instead prefer the end of the month and end of year to negotiate the best price and options of your future vehicle.

In addition, if you already benefit from an optimized offer such as a call offer, that is to say that of advertising, the negotiation may be very complicated, if not impossible. In addition, the personal contribution that is asked of you will be more important.

However, do not hesitate to compare the dealership offer with that of other financial institutions. By playing with the competition, you can encourage the dealer to lower the interest rate.

Therefore, never accept the dealer’s proposal immediately. The tenders issued by the dealer are generally higher but may contain an extension of the vehicle warranty.

So it’s up to you to do the math to see if you’re doing a good job or if you’re more interested in getting a car loan from a financial institution, knowing that banks and credit organizations generally offer more interesting rates.

You must pay attention to the price of the car in case the dealer offers you a tempting offer like a zero rate loan.

Tell yourself that he has little interest in making such gifts and that this type of proposal can hide something else. If you take the time to compare prices and find that the car is priced higher than elsewhere, you should try to ask for a discount. The dealer should not refuse if he does not want to lose a good customer like you.

You are able to ask for a nice discount because you know the prices commonly applied and therefore the high price quickly turns into an advantage to simultaneously negotiate auto credit. In general, do not be seduced too quickly by promotions.

The rates displayed in advertisements apply to specific amounts and repayment terms. If your borrower profile does not exactly match the criteria listed, another less attractive rate will apply to you.

Most often, the rates put forward are only valid for very short repayment periods and therefore for borrowers with a large repayment capacity.

Wayne McLaughlin

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