With all this talk about dealerships making so much money off of financing, is there ever a time when you should finance with the dealer? Short answer is yes. The long answer is yes, but only if the dealership can offer you better terms than you could get on your own. And of course, the only way to know what you can get on your own is to find out before you go to the dealer. That’s why it’s important that you apply for a loan online, and get a rate quote before you even start shopping for your car.
Let’s say you’re a smart shopper. Since you’re here reading this site, I think that’s a safe thing to say, don’t you? You apply for a loan online, and get approved for 8% APR ( annual percentage rate. ) That’s not a bad rate at all, especially considering how rates have been rising lately. After you have this solid quote in hand, and you get your new car price quote from the dealer, the fun begins.
There’s a good chance the dealer will just beg and plead to finance with them – and he may avoid talking about rate at all! This is where you have to stand firm. Say that the only way you’ll finance with the dealer is if he can offer you a better rate than you are already approved for on your own. Sometimes you’ll win, and he’ll come back with 7% instead of the 8% that you had. You win, because you pay less in interest. And the dealer wins too, since he gets paid for every customer who finances with him.
There is never a time when you should accept a higher rate to finance with the dealer – it just doesn’t make sense! Going from your 8% to his 9%, on a $25,000 loan at 72 months is a difference of $886 in finance charges. I don’t know about you, but I’d rather hang on that $886 than give it to the bank, just so the dealer will be happy.