Buying or leasing a vehicle? You need to read this first. I used to work at a Mercedes-Benz dealer and I’m going to spill the beans on what you need to know about your next auto loan or lease. You may or may not be getting a Mercedes but that’s not the point. I’ll start with some general credit requirements that many auto loan lenders want to see and then share some secrets on how to get the best deal.
Keep in mind we’re a tradeline company so the auto loan “hacks” is from my personal experience.
Table of Contents
Buying or leasing vehicle credit requirements.
If you are going to lease a vehicle then your credit will generally have to be much better than if you want to buy and get a loan. There’s no exact number as every manufacturer will have their own requirements. When in doubt just call and ask! You’ll want to ask for the finance manager, however, whatever you do… do not let them talk you into applying. Some finance managers will just say something like, “well you can fill out our online application and I’ll be able to tell you and give you specifics.” Don’t apply until after you’ve enhanced your credit file and you can put your best foot forward.
A good finance manager will be able to tell you at least a credit score range. If they say something like, “oh yeah as long as you have a 650 you’ll get approved, and if you’re 700+ you’ll get the prime rates” then you have some solid goals. So if the finance manager isn’t helpful move on to the next one until you find someone you can work with. In general, finance managers are masters of diversion but we’ll talk more about that later in my “hacks” section.
Qualifying for a GOOD rate
Now leasing will likely require more stringent credit requirements depending on the brand of car, however qualifying for a purchase is surprisingly more attainable. I’ve worked with clients who had scored in the 500s and were approved for a loan no problem. The real problem is the interest rate! If you’re happy that you got approved for the car you want but have to pay 22% interest then what’s the point? This is where the corner lot “buy here pay here” guys make their money. It’s not on the profit of the vehicle itself. They make their money on the loan! So the better your credit score is the better your interest rate will be. But there’s another key component to consider, your cash!
Remember I told you the finance manager are masters of diversion when it comes to buying or leasing a vehicle?
Well, there are a lot of ways that they want to make money off of you. The most common term we think of is the interest rate. We see that high rate and we think, no way. They offer to work something out for you and lower the rate and you think, awesome let’s do it! However what you didn’t notice was that the increase the term or length of the loan. Instead of a 48-month term where you’d have the car paid off on 4 years, they lowered the rate but made the term 60 months. So they’re making their money back on the term, and possibly making more money!
You’re pretty smart though. You caught the rate sheet and notice the better rate means a long term and you don’t like that. No problem they say. “Let me see what I can do,” they say as they scurry to the back office and take pencil to paper. They come back out and say, “great news.” The offer is to keep your rate and term the same, hooray! Except for one thing, instead of $1000 down you now need to put $3500 down. Oops. See what I mean about diversion. Most people don’t catch it. They’ll get your attention on the term that’s most important to you. Don’t like the price of the car? No problem we’ll negotiate and change the rate. Don’t like the rate? No problem we’ll negotiate and change the term. See what I mean?
So what can you do?
Number one is “be aware”. The reality is that car dealers and sales managers really want to sell you a car. I mean really want to sell you a car. Finance managers and lenders want to give you a loan. It’s how they make money. So they’re not your adversary and you shouldn’t be afraid of them. They will do what it takes to have you buying or leasing a vehicle that day. They are simply doing their job which is to make money for the dealership. Period. Some are better about it than others. A great salesperson and finance manager can be awesome to work with. As a salesperson I made long lasting friendships with my clients.
The reality is, though, that the finance manager will pigeon hold you when you are lacking good credit or income. You will be limited in some capacity by these things. You won’t get approved for a car loan that you can’t afford, so they will ask about your income. Also, your credit will dictate a lot of your ability to negotiate the important aforementioned terms. We can’t help with your income, but we certainly can help with your credit.
Now as promised, here are some of the secrets:
Buy on the last day of the month:
Owners of dealerships are under great pressure from manufacturers to get a certain number of cars out the door every month. This pressure gets put on the sales managers who then pass the baton of stress down to the sales people. The last day of the month is their last opportunity to meet their monthly quota. Dealerships will often negotiate a lot, especially the last day of the month. When you find the car you want to tell them you’d be prepared for buying or leasing a vehicle that day. They love to hear that phrase and it will set you up for the best position to negotiate. They don’t negotiate as hard if they don’t even know if they’re going to get a deal at the end of it. Remember, you’re going to drive it home that day and let them know it!
Everything is negotiable:
Just remember the art of diversion. It’s one of their main tactics so know that going in. They might work on the price of the car for you but then nail you with how much they’ll give you for your trade. Even that value is negotiable. At the end of the day go in knowing what’s most important to you. Is it putting as little down money as possible so-as to preserve your cash, then make that the point they have to get to. Is it the monthly payment so that you’re not stretched too thin every month? Then go after that don’t accept less than what you want. Trust me on that. Stick to your guns.
Talk to the manager:
If it takes 4 or 5 rounds with the manager to get the deal you want, then do it. It happens all the time so don’t feel too awkward about it. You might feel uncomfortable but it’s worth it, just be polite but firm. By the way, most salespeople have NO say in negotiating. They will go and forth between you and the manager. The best deals I saw as a salesperson were the people that got past that point in the negotiations and dealt with the manager directly. Even then they didn’t accept the manger’s offer for the first few rounds. Keep going until you’re happy. It might be on the first round with them or the fifth. If you have to, walk away. Be polite and don’t burn a bridge, but walk away. They’ll come after you. If not right then, you’ll likely get a call the next day.
So, there are some helpful car dealer “hacks” from a former insider that I hope you find helpful. Officially we as a company can’t help you secure loans much less get you a deal on a car, but what we are great at is talking to you about your credit and help you reach your goals. If you want to enhance your credit so you can be in the driver’s seat (see what I did there?) with lenders and dealers then get started with us today!
Mike is as thorough as they come. We often call him “data”. You will walk away with knowledge after speaking with him. Working with Mike can help you understand the tradeline process.