How to Successfully Negotiate a Car Loan When Buying a Vehicle

Buying a car is a major financial investment and that's why you should know how to negotiate a car loan before you go to the dealership.


Apr. 5 2023, Published 6:05 p.m. ET

Car loan paperwork and keys
Source: Getty Images

If you’re on the market for a new or used car, you’ve got your eyes glued to pricing, features, resale value, and auto loan rates. As interest rates keep rising, you may be apprehensive about taking out a car loan.

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Buying a car is a major financial investment, and if you aren't careful, you could end up paying a lot more for a car loan than you should. That’s why it’s important you come to the dealership equipped with strategies to negotiate and bargain for a more manageable car loan.

Keep reading to find out how to negotiate a car loan.

What to do before a negotiating a car loan.

couple shopping for an suv
Source: Getty Images

Couple looking at SUVs and trucks

Before you begin negotiating, you’ll need to do the following:

Check your credit score: The interest rate you pay is impacted by your credit history, so check your credit score. The higher your score, the lower your interest rate.

If your credit score is very good or excellent, you’ll have more negotiating power because lenders will offer you a lower rate. For example, a consumer with an excellent score may pay $522 a month, while a customer with a lower score might pay $562 a month.

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Determine how much you can afford: Make sure you can afford your new car payment and the additional costs that come with buying and owning a car. They include:

  • Auto insurance: Get a quote from an insurer to find out how much you may end up paying, and don’t forget your car’s make, model, age, and condition also factor into the total price. Your credit score may also help determine how much you pay.
  • Gas: If you drive a lot, consider the fuel economy of your car and prepare to spend more on gas.
    • Loan payments: The loan amount you pay every month will include your car’s sale price, taxes, fees, add-ons, loan terms, and interest rate.
    • Maintenance: While every car will need maintenance and repairs, the older your car is, the more likely things may go wrong.
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    Research auto loans and interest rates: Shop around and compare interest rates before you head to the dealership, so you know what’s possible based on your credit score and income. And while a dealership’s finance department may help you find a loan, you should get rates from multiple lenders and apply for car loans directly on their websites.

    This process will also help you negotiate your interest rate with lenders. Some lenders may try to beat the rates you’re quoted from a competitor.

    Tricks for negotiating a car loan.

    Source: Getty Images

    Family shopping for a car

    Now that you’re aware of your finances and credit score and you’ve researched auto loans and interest rates, it’s time to negotiate a car loan — if your credit score is high enough.

    Unfortunately, even if you arrive at the dealership with research and comparison pricing, having a lower credit score may hold you back from negotiating a car loan at your ideal interest rate. Luckily, you aren't out of options.

    There are ways you can reduce your auto loan interest rate:

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    • Make a larger down payment: The more you borrow, the more you’ll lose. If you put more money down, you’ll reduce how much you have to borrow, which could help you qualify for a lower interest rate.
    • Choose a shorter repayment term: The shorter your repayment time, the less interest you’ll pay, but you’ll have to pay more each month.
    • Get a consignor: Whether you have bad credit or want more negotiating power, you may want to ask a creditworthy consignor to apply for the loan with you.
    • Reduce your car’s price: Choose a cheaper car or decline add-ons like service and maintenance contracts.
    • Monitor your credit score: Improve your credit score by paying bills on time, pay down credit card debt, dispute inaccurate transactions, and check your credit report.
    • Make a counteroffer: Negotiate the price of the car. Many dealerships will let you make a counteroffer on the price before you purchase it. And if you pay less upfront, that’s less you’ll pay in interest in the long run.
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