Q: I think I got a terrible financing deal on my car loan. What can I do about it?
A: “Most deals are not in the customer’s favor,” admits Reggie Drumgold, sales manager for Major Chevrolet in Long Island City, New York. Once you’ve gotten into a bad deal, there’s virtually nothing you can do to remedy the situation aside from paying the car off.
Drumgold recommends you “shop around for the best interest rates by going directly to a financial institution, including your local bank or credit union.” He says dealerships charge a few points over the bank’s rate for negotiating the deal. “If you want to be ahead of the game, get your own financing. Just remember: you’ll need good credit to get approval.”
Financial institutions base their rates on your credit rating and on the purchase price of the car (rather than the market value). So before you get financing, make sure your credit report is accurate and thoroughly research the value of the car that you plan to purchase.
In any case, don’t purchase a more expensive car than you can afford because you could end up paying more in interest than the car is worth in the long term. In addition, maximize your down payment to minimize your monthly payment and terms. Don’t overpay for extras, such as alarm systems, fog lights or an extended warranty. These additions boost the final cost of your car. For the best deal, Drumgold suggests, “Pay for the car with cash.”