How to Negotiate an Interest Rate on a Used Car

Buying a car can be fun and exciting, but it also requires some good bargaining skills to help ensure you get the best deal. Whether the car is new or used, most people don't expect to pay the full asking price and enter the transaction ready to negotiate the cost with the dealer. What many don't know is that you can negotiate the interest rate on your car loan as well.

Instructions

1. Talk to your banker before you sign any papers with the car dealer. Knowing what interest rate and terms your bank offers will help you negotiate a realistic rate with the dealer.

2. Decide ahead of time if you are willing to purchase back-end products, like credit life insurance or an extended warranty. The finance manager at the dealership earns commissions on these products as well as the financing and may offer a lower interest rate if he knows he'll make money elsewhere in the deal.

3. Insist on negotiating the sales price of the car and the interest rate of the loan before the dealer starts talking about insurances and warranties. That way, if you don't plan to purchase back-end products, you'll have an interest rate you can live with before they know you're not going to buy any of those products.

4. Offer a large down payment if possible. The more money upfront the dealer can put in their pocket, the more they're willing to negotiate on the sales price and the interest rate.

Tips & Warnings

• Maintain a good credit history. Interest rates for any type of loan are based on your ability to repay. The better your credit and the higher your credit score, the lower your interest rate will be.

• If you can hold off car shopping until the end of the month, you'll have a better chance of getting a great deal. Dealers and their sales staff have monthly incentives and goals, so they're much more motivated to negotiate the last couple of days of the month.