This week I shot another one of my savings makeovers based on the strategies in my book SAVE BIG. For this makeover, I worked with the McGraw Hill Federal Credit Union to help a New Jersey family save big money on their home loan and their car loan. I was once again reminded what phenomenal resources credit unions are. In fact, if you are in the market for a car, you have GOT to find a way to join a credit union, if you're not already a member. You can find one you are eligible for at www.findacreditunion.com.
Credit union auto financing is generally such a great deal that I'm going to issue a rule here: never shop for a used car at a dealership without first getting outside financing quotes, especially from a credit union. The loan is one more factor the dealership can play around with in the messy math equation of buying a car. The process is torturous enough. Don't add to the angst.
When I checked car loan rates at a credit union and some other non-dealer sources, here's what I found: Car Loan Interest Rates from Different Sources:
As you can see, by shopping around for an auto loan, I found a low interest rate of 4.25 percent at the credit union, almost a third the size of the highest quote of 11.22 percent. Now let's see how that helps us SAVE BIG on a $25,000 car loan, the national average.
24-month, $25,000 Auto Loan: The rate at the Bank was 11.22%. The amount owed? $28,032. But at the credit union at a rate of 4.25% the amount owed is $26,112. BIG SAVINGS= $1,920
There you have it. Close to $2,000 in savings achieved through half an hour's worth of work comparing interest rates. I love it when such a small effort yields such BIG SAVINGS!
With outside financing information in hand, you can walk into the dealership with some knowledge that gives you power. Don't ignore what the dealer has to offer; just don't consider it on its own. Now you have a point of comparison. If you have excellent credit and the dealer is offering a special to get people in the door, you may get a great loan at the dealership. Be sure you know your credit score before you walk into a dealership. Salespeople have been known to lie and claim your score is subpar so they can stick you with a higher interest rate. Get your real score at www.myfico.com. If you are interested in the dealer's financing, be sure to negotiate the price of the car first and then terms of the loan. Keep the two transactions separate. Always remember, that car dealers can often make more money on the vehicle financing than they do on the vehicle itself! People seem to know that you need to hustle and haggle for the best deal on a car, but they forget to hustle and haggle for the best price on the car loan. As you can see, doing so will help you SAVE BIG.