Dealer Financing

When you approach the dealership for financing, the first thing your business manager does is to run your credit report and sends your credit information to the lenders they deal with. The business manager then takes the lowest approved interest rate and tops it up with dealership's profit on the financing. There is no law saying the dealer has to show that profit to you. This is why you have to do loan and price research and have a benchmark for negotiations! Be equipped with some business lingo that might be used to take advantage of you.

• Zero percent APR (Annual Percentage Rate)
  

Also known as zero percent interest. To good to be true, isn't it? Not everyone can get 0% APR, because it applies to those with a good credit score to ramp up sales on select models. The chances are high that model for which it applies is not the car you want. Very often 0 % APR is applies to short-term loans (not exceeding 3 years) only.

• Consumer rebates
  

The manufacturer gives rebates to consumers directly on certain models, so this shouldn't come up during price negotiation with the salesperson. It is not part of the dealer's package.

• Simple interest
  

Also called "flat rate interest," simple interest is calculated only on the total amount of the loan by multiplying the principal balance by the rate of interest by the term of the loan. This number is then divided by the number of months of the loan for the amount of interest paid each month. This is the best option for you and should bargain for this.

• Compound interest
  

Compound interest requires you to pay more interest at the beginning of the loan period than at the end. The longer the term of the loan the more interest you will pay. This is only good for short-term loans.

• Base M.S.R.P.
  

A short form for Base Manufacturer's Suggested Retail Price. This is the manufacturer recommended retail for a particular model as delivered from the factory. It does not include items the dealer has added such as security systems, Vehicle Identification Number etching, etc.

• Base M.S.R.P. plus Options

This price includes the Base M.S.R.P. plus all options added at the dealership. The options range might include, finance protection, Vehicle protection and  Security protection. The sales person will always try to sell you these options because that's where they make the most money. Only accept what you can afford and in your view is necessary. Don't stretch your pocket too much!

­While negotiating for a financing deal with the business manager, you should bargain on the chargeable Interest rate, duration of the loan, down payment, rebates, and monthly payments. Ask about early repayment penalties and nature of interest(should stay the same for the loan duration). If you can't get a good deal, walk away! You can always get it elsewhere, but don't compromise too much for the sake of completing the deal. If you do, you will be exerting a strain on your finances.

Once you have agreed on these, verify your contract terms and only sign if satisfied with all the numbers and filled out correctly.