Purchasing and Negotiation Training

Steve Hague, author, speaker, and Certified Purchasing Manager

Editor’s note: Steve Hague is a frequent contributor to this blog.

For most people, buying a car is the 2nd largest purchase they’ll make in their lives, their home being the largest.  If your automobile purchase will be financed with borrowed money, invest as much time shopping for the best rate as  shopping for the car itself. The finance rate and borrowing terms wisely can save hundreds or even one thousand dollars or more on the total cost of ownership.

The first steps are to know your credit history and if there are more than a couple of credit problems that show up on the report, it’s a good idea to check your credit score.  You also need to establish your budget and how much you can spend on the purchase when taking into account all other debt and your present and future expected income. 

Once you know what you can spend and what your credit score or history is, it’s time to begin shopping.  Unless the car manufacturer (not the dealer) is offering special financing rates, you probably won’t find the best rate at the dealership. They may work with a handful of banks and finance companies to find the best rate, but whatever they offer to you they are taking a small piece for themselves. It’s another way for them to make money. 

Start with the bank that you use for local savings and checking. Sometimes there may be special rates if you do a good deal of business with them. Also look at credit unions locally as well as AAA or other consumer agencies that to which you may belong. 

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Make sure that you don’t have any of these companies’ run a credit check on you until you decide that they are the institution that you will use. You can tell them your credit score or that your credit is excellent, good, fair, etc. Just ask for the rate based on this information. Your credit score can actually go down if there are multiple checks on it. 

Once you’ve gotten the best rate locally, it’s time to expand your search throughout the country. Yes, you can and should check outside of your local area. There are many banks and financial institutions that work online and have outstanding rates. They are safe and quite effective.  You can also check with BankRate.com and other finance related websites for the best borrowing rates nationally. 

Buying a new vehicle is expensive enough. Make sure that you do all that you can to save if you’re financing by shopping the rate.