How Dealership Financing Works

Financing a car through a dealership is something that many people do every year; however, if you are considering this process for the first time, it’s a good idea to learn how dealership financing works. When you enter a dealership – unless you work in one yourself – you’re essentially entering a foreign land. They make the rules and if you’re not careful, you’ll find yourself abiding by all of them. So let’s look at some tips to help you realize what you can expect when you go to finance a car at a dealership.

  • Interest Rate Negotiations
    You know that when you finance a car, unless you’re able to take advantage of zero-percent financing, you are going to have to think about the interest rate you’ll be offered. If your credit is stellar, you usually feel that you have more negotiating power; however, if it’s sub-par, you may feel that you have to take what’s given to you.

    It’s important to keep in mind that the car dealer’s job is to make as much as possible off the sale of the car. If you don’t want this to happen then you better get ready to negotiate. One way that you can increase your negotiating power is by pricing interest rates at banks and other establishments before visiting the dealership. If you know your worth, it will be difficult for the dealer to argue with you.

  • Be Leery of the Extended Warranty
    In an effort to get you to spend more money, the dealer’s manager may explain why you need an extended warranty on your vehicle. However, in most cases, the warranty you are given is sufficient enough, especially with new cars. Of course, there may be instances where an extended warranty is beneficial. Just be careful not to jump on it at the first offer without exploring its benefits to you.
  • You Are Not Required to Buy Insurance
    Some dealerships will try to sell you on the idea that you need to buy life and disability insurance when purchasing your vehicle; however, it is not a requirement. It simply says that if something happens to you, your investment will be protected. You can get it if you want, but you don’t have to. Keep this in mind.

Now that you know a little bit about how dealership financing works, you can walk into the office feeling more confident about the dealership financing process.


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