How to Negotiate Your Car Loan Rates at the Dealership

Dealership financing offers many conveniences. For starters, you're talking directly to your seller, so the middleman is eliminated, which reduces the risk of communication breakdown and added fees. And more often than not, they offer greater flexibility, again, because you're dealing with them directly. With that in mind, if a car salesperson tells you that their rates are fixed, get ready to bust out the door and talk to another dealership. Because when it comes to dealership financing, there's always room for negotiation. Always.

You're spending your hard-earned money, so you better have a take-no-prisoners mentality when it comes to negotiation your rates. Here's how to do it.

1. Negotiate both the price and payments

Once you hint at negotiations, many car salespersons will divert your focus on the monthly payments alone. Though lowering your monthlies is a good thing, you shouldn't forget to negotiate the car's price tag. Car salespersons would rather you negotiate the payments than the actual price of the car because that's what they base your payments on, and the higher the price tag, the higher the monthly rates they can charge you.

2. Know exactly what you want

It's difficult to know when you've negotiated successfully if you don't know what you want. For example, do you want to pay off the principal of your loan minus the interest you would pay? This would be ideal for a simple interest loan. As the terms of the loan get more complicated, then the more effort you should put in to understanding them. For all you know, you're just negotiating yourself into zero savings. Don't hesitate to have a financial expert look at your negotiated loan terms to see if it is indeed to your benefit.

3. Skip out on all the extras

Salespersons will often include a lot of extras to the price tag, so make sure to ask how much the car would cost without them. From rustproofing to car alarms to floor mats and more--although these items are useful, chances are, you can buy these at a lower price elsewhere.

4. Choose the shortest loan term possible

Longer loan terms mean more interest, which leads to a higher cost of purchase, and ultimately, more wasted money. To save as much as you can, you need to keep the term as short as you can. As leverage, paying a significant amount on your down payment is a good idea, as this lowers your loan rate overall.

5. Keep your emotions in check

Due to the amount of money involved, the car-buying process can be a testing time for many people. If the dealership is unwilling to negotiate, don't let your emotions get the best of you and simply walk away. Avoid any negative words and actions that you might regret. Remember that walking out is just part of the negotiations process. They may still contact you--this time with terms that are more to your liking.