Can you negotiate interest rates on car loans?
If a car is in stock, and you have a good credit score, you might be able to negotiate a good interest rate for your loan—the salesperson may be more willing to make a deal to sell a car already on the lot. On the other hand, dealerships can also mark up the prices of cars, and buyers may be willing to pay more for the convenience of getting one sooner. Doing your research is the only way to know if you’re paying a fair price.
Pay off your car loan faster
Whenever you come into extra money, such as birthday gifts or work bonuses, consider paying off your car faster. Many car loans are open loans, allowing you to make additional payments or settle the loan in full anytime without penalties or fees. (Confirm with your lender.)
Common car sales tactics to watch for
Upselling
The salesperson might attempt to upsell you on additional features and accessories. If you’re financing or leasing the car, they’ll likely focus on the monthly or bi-weekly payment increase rather than the total cost. They might say, for example, that adding features X and Y will increase your bi-weekly payment by just $15—about the cost of a Big Mac combo. (I’ve used this line myself, and yes, it worked.) Doesn’t sound like much, right? But consider whether the upgrade will fit your budget. Let’s say you’re fully financing a $30,000 vehicle in Ontario. The cost with 13% HST would be $3,390. If you signed a six-year loan with an interest rate of 7.48% and made bi-weekly payments, the total interest would be $8,222.21. If you added a feature or an upgrade that cost another $15 per bi-weekly payment, that would add $2,340 to the cost of the car, plus $641.33 in interest over the life of the loan.
Skip the unwanted add-ons
Evaluate the necessity of extra offerings like extended warranties or upgrades, especially if you have a strict budget. Request an itemized list of all charges and look for unexpected costs.
“Good cop, bad cop”
While many salespeople are genuinely helpful, informative and valuable in the car-buying process, that doesn’t mean they won’t use psychological tactics to persuade you to buy. During test drives, I’d tell customers a little bit about the car and then focus on personal lifestyle questions that I could bring up later in the sales pitch. For example, if I found out that they commuted to work, I’d say something like “If you’re here, that means you don’t want to spend hours a day taking the bus to work and back, right? Let’s work together and write a deal today.”
Sales tactics might involve a coordinated strategy. For example, when negotiating with a customer, my sales manager and I employed a “good cop, bad cop” tactic where he would assume an aggressive attitude, while I had an understanding, sympathetic demeanour. My goal was to build rapport and gain the person’s trust, in contrast to my manager’s near-hostility. This was a technique I was taught by someone with more than 20 years of industry experience—and most of the time, it worked.
Don’t bend under pressure
A salesperson might try to rush or pressure you into buying. This may be amplified if car inventory is low, but stand your ground and remain calm.
What can you negotiate besides price?
As part of your deal, you can ask about perks you want, such as complimentary oil changes for a year, car accessories, winter tires, window tints or all-weather floor mats. But if you want to attempt this, research the costs of these add-ons before you visit the dealership. (Read further tips on planning for a financial negotiation.)
Get it in writing
If a salesperson makes generous offers like free oil changes or extended warranties, get them in writing. Documenting all promises can help avoid misunderstandings.
It may be hard to trust your instincts during negotiations, as emotions and high-pressure sales tactics can cloud your judgment. However, thorough preparation can help you tell if a deal is too good to be true—or not good at all. Don’t hesitate to seek a second opinion. Above all, stay calm and confident, and be willing to walk away if you’re not comfortable with the terms of the deal.
Key questions to ask before signing a car deal
- What is the final out-the-door price, including all fees and charges?
- Are there additional warranties or protection plans added to the deal? Can I opt out?
- Can I see a breakdown of the financing terms and monthly payments?
- Are there prepayment penalties if I decide to pay off the loan early?
- Can I review all the documents and contracts before signing?
Check for hidden fees
Look for hidden or tacked-on fees not previously discussed during negotiations, such as excessively high administrative charges. Carefully review all documents, question unfamiliar charges, and don’t hesitate to call off the deal if you’re uneasy.
The best first car to buy
Buying your first car in Canada is an exciting milestone. By following these insider tips and navigating the car market with caution, you can make informed decisions and find the best first car to buy for your needs, preferences and budget.
If you have a particular car in mind and you’re not in a hurry, it’s worth thinking ahead by up to a year, if not more. And if you’re open to variations in colour, model or trim, this flexibility can work to your advantage.
/fz3lnxke.JPG)
