Five tips to drive down the cost of buying a car

Andrew Lisa

Knowing what to do, and what not to do, when buying a car can mean the difference of hundreds or even thousands of dollars over the term of your loan and the life of your vehicle. Before ever setting foot in a dealership, make sure you’ve done the necessary preparation to put yourself in a position to leverage the best deal possible. Here are 5 tips to purchasing your first car seamlessly.

Get pre-approved for financing: When you get approved for financing before you enter negotiations with a dealer, you force the dealer to match or beat the rate your bank or credit union has already offered. This step essentially gives you a bargaining chip to enter negotiations.

“If you have no backup plan, you’re stuck with whatever the dealer is willing to do,” said Brian Moody, site editor at Autotrader.

Don’t string out payments: Signing on to an extended loan can add hundreds or even thousands of dollars to the price of a vehicle. People often seek longer loans because they’re buying a car they can’t actually afford.

“Practically anything seems affordable if you break it up over enough payments,” said Joe Wiesenfelder, executive editor of “This is what leads shoppers to lose sight of the car’s purchase price.”

Shop for the best interest rate: The interest rate on your loan is just as important as the price of the car. A deal on a car’s price isn’t good if the exorbitant interest rate on your loan is going to jack up the overall cost over time.

Remember that credit unions often offer lower interest rates than big banks.

“A dealer might be able to get you the best rate,” Wiesenfelder said. “Especially in the case of factory incentives like low- or zero-percent financing, but you won’t know it unless you go in with another quote or two from, say, your own bank or a credit union. The dealership is a middleman, and you might be able to save by going directly to the source.”

Know your credit score: There is a direct correlation between your credit score and the loan you’ll be able to secure. Your FICO credit score, which ranges between 300 and 850, is an approximate representation of the risk you pose to lenders.

“Before ever visiting a dealership, a car buyer needs to know what his or her credit rating is and how that will impact the financing options,” said Karl Brauer, senior analyst for Kelley Blue Book. “The best way to do this is to get a report from one of the major credit tracking companies (Equifax, Experian and TransUnion).”

Work on your credit score: Use the time that you’re car shopping to boost your credit score.

“A better credit score will mean better financing terms and lower interest,” Moody said. “The ads people see on TV for low lease payments or low interest rates all have fine print — that fine print say ‘for buyers who qualify.’ Translation: buyers with excellent credit.”

One of the fastest ways to quickly boost a score is to pay down credit card debt, because credit-card utilization carries a lot of weight with credit reporting agencies.

Andrew Lisa writes for, a personal finance news and features site.