Know the cost of credit. People tend to be the least prepared for the finance portion of car buying, but this is the area that needs the most concentration. Nearly 70 percent of all cars bought in this country are financed and a significant chunk of those loans are arranged by dealers. However, few buyers take the time to research their credit histories or other finance options before walking into a dealership. And that is a big mistake.
Dealers make money on loans.
Either they get a fee for placing the loan with a particular bank or they get to mark up interest rates offered by auto financing companies. If you agree, the dealer and the lender split the money made on the extra 4 points. The best defense against paying too much for your loan is to find out what other lenders will charge you. Check with several banks, savings and loans and credit unions about the rates you could get through them. It doesn't hurt to start the application process with other lenders and to be pre-qualified when you walk into the dealership.