How to Negotiate an Interest Rate on a New Car

Part of the joy of buying a new car is trying to get it for the best price possible. In addition to negotiating the car price, you must negotiate the interest rate on the new car. Be prepared--do your homework before you go to the dealerships. You can negotiate a good deal only if you know the ground rules.

Instructions

1. Pull your credit report before you go out to buy a new car and negotiate an interest rate. Your credit score is one of your primary tools when it comes to negotiating your car interest rate. It can make or break a new car deal.

2. Increase your down payment. Don't get sucked into these "no money down" deals. The less money you put down, the higher your interest rate. If you are looking at dealer financing, have your dealer present to you various proposals with various down payment options.

3. Choose a reputable financing source. Some car dealerships pad the interest rate to make a profit. Your cheapest and most secure means of financing is either a credit union or your own bank. If you have a poor credit score, you may be stuck with negotiating interest rates are your dealership. Be on your toes.

4. Take your time and shop around. The more choices you have, the better your decision will be. Don't be pressured, bullied or coerced into taking the first deal presented.

Tips & Warnings

• The amount you will pay in interest is a function of the interest rate and the length of the loan. To make a truly informed decision, calculate the entire interest amount to be paid over the period of the entire loan.

• Be wary of dealerships. Many of them put the cart before the horse. They ask you for your monthly car payment budget and then back into the figure. Instead of telling them your monthly budget, tell them it depends on the interest rate. When they get over the shock of your payment terms requirement, be prepared for fast talk.