While paying in cash for a car can help you negotiate a lower price, it's an option that is out of reach for many consumers. There are various loan financing options available, so be sure to research your options for the best deal. While dealer-sponsored financing may be convenient, you may be able to find better terms, lower rates, and more open financing policies at a credit union or local bank. Be sure to research and compare across different auto loans, including the loan term, the annual percentage rate (APR), as well as any additional fees or penalties. Also, getting a pre-approved loan from your credit union or bank could give you added confidence in negotiating a good price.
As a general rule, keep your loan term to five years or less; the longer the loan term, the higher your interest costs will add up by the end of the loan term. Just make sure you don’t wait until the last minute to figure out your financing options; you may end up relying on a dealer's loan and held to his loan terms.
