An auto loan is more than the sticker price on a vehicle. When you're financing a car there are plenty of other costs to know about, especially if you're looking to get the lowest out-the-door price that you can.
Know Your Auto Loans Costs
The price you're going to pay for a vehicle after all its associated taxes and fees is known as the out-the-door price of a car. This is different from the manufacturer's suggested retail price, or MSRP, that you see on a vehicle's window sticker. And we're still only talking about the cost of the car itself.
If you're looking for the real cost you're going to pay, you also need to account for the interest that most borrowers encounter when they take out vehicle financing. It typically isn't free to borrow money with a car loan unless you qualify for 0% financing, which is rare, especially when you have credit challenges.
The amount you have to repay on your auto loan depends on the interest rate you're assigned when you're given a loan. The better your credit score is, the lower the rate you're likely to see because your credit score is one of the biggest factors in determining your interest rate.
Typically, you should see all the things that go into your auto loan and car buying price when you get your buyer's order from the dealer. This lists all the costs associated with your purchase. Be sure to read this carefully and know what you can negotiate on an auto loan before you sign your buyer's order. Once it's signed, you're agreeing to pay for everything listed.
What Can I Negotiate?
To get the lowest price you can for your next auto loan you need to know what's negotiable. You don't always have to pay every cost listed as-is on your buyer's order, and you don't have to agree to everything the dealership tries to sell you.
These items can typically be negotiated before you accept the price you're looking at:
- The selling price of the vehicle – The MSRP is the starting price for a specific vehicle, as suggested by the automaker. Once you've added any dealer options or upped your trim level, this is the final sales price of the car (before taxes and fees). It's known as the negotiated sales price of a vehicle.
- Documentation fees – Doc fees, as they're known, can range from less than a hundred dollars to a few hundred dollars or more. This is the cost the dealership charges to prepare the paperwork and send in all your title and registration information to file with the state. This fee is capped in some states, but others are able to charge whatever they wish. You can negotiate this cost, but whether or not the dealer budges on it depends on who you're working with.
- Dealer add-ons – These can be additional features such as paint and fabric protection, weatherproof floor mats, or cargo packages. Some additional features are added when you select a certain trim level, so if something is being added that you don't want or aren't interested in paying dealership costs for, you can ask for it to be removed.
- Interest rate – Though your credit score largely determines your interest rate, you can negotiate it in several ways, adjusting how much you borrow by using a larger down payment, opting for a different loan term, and having a cosigner are all ways in which you can attempt to lower the interest rate you're given.
ACE Tip: When you ask for something to be removed or changed in your negotiations, ask the dealer to initial it, and request a completely amended clean copy of the buyer's order before you sign it (hang on to the original for comparison).
Non-Negotiable Auto Loan Costs
Some parts of the car loan process aren't able to be negotiated with your lender, or the finance manager at a dealership. These things have to be paid, no matter what:
- Taxes – Sales tax is required on vehicles in nearly every state. This can typically be paid to your lender in one lump sum, and it's best to do this at the beginning of the process. In fact, we recommend paying the cost of your taxes, title, and registration upfront with your down payment. This way you avoid paying interest on these fees.
- Title fee – The fee you're charged for a copy of the vehicle title varies by state. Some charge a few hundred dollars, while others charge a minimal flat fee.
- Registration fee – This fee covers plating your vehicle and registering with your state as a road-legal, drivable vehicle. This fee varies by state, as well, and is charged in very different ways throughout the country.
- Destination charges – This fee only applies to new vehicle sales, and is the cost of having the car shipped from the factory after it's built to your specifications. It's non-negotiable and can range in price.
Prepared to Take the Plunge?
Now that you know what to expect going into your auto loan, make sure that you're wise with your vehicle choice as well. If you're dealing with poor credit, focusing on getting a reliable used car or certified pre-owned vehicle can be a good way to save money and get a good deal on a car loan.
Whichever route you choose, be sure to get a vehicle that meets your needs and fits within your budget. And don't forget to factor in the costs of vehicle ownership such as insurance, fuel, and maintenance.
Also, if you're considering a bad credit car loan, make sure that you're prepared to prove your ability to take on an auto loan. Subprime lenders can work with tough credit situations, but they require documentation to prove that you have the ability, stability, and willingness to take on a car loan. You can learn more about bad credit auto loan qualifications here.
Ready to Hit the Road?
If you're ready to dive into another auto but don't know where to turn due to credit challenges, we want to help. Here at Auto Credit Express, we've gathered a nationwide network of special finance dealerships that are signed up with bad credit auto lenders. To get matched to one near you, simply fill out our fast, free car loan request form, and we'll help take the hassle out of finding a dealership.
