13 Car Financing Tricks That Could Save You Thousands

Purchasing a car is no small expense, and finding creative ways to finance your vehicle purchase could lead to thousands in savings. But having the right knowledge in hand before you start car shopping can make all the difference.

Not only does getting a better deal help you drive off the lot with confidence, but it can also minimize the impact on your budget. Here are 13 savvy tips that could be smart money moves for car owners looking to save on their vehicle financing.

Many dealerships house extensive financing departments, which can make the purchase process convenient. But, generally, it's best to avoid dealer financing if you want to save money. In most cases, it comes with much higher interest rates and fees, which inflate your total costs over the course of the loan.

If you are able to qualify for a competitive interest rate through a dealership, it may be worthwhile. But be sure to read the fine print to uncover any potential rate increases or embedded prepayment penalties.

Depending on the situation, a lower interest rate could lead to hundreds or thousands saved.

Credit unions are known for offering lower interest rates to members on a variety of loan products, including auto loans. Although the exact amount you can save on interest charges varies, it's clear that a lower interest rate can add up to big savings.

For example, let's say you take out a 60-month loan with a 7% interest rate for $25,000. This would lead to a monthly payment of $495.03 and total interest charges of $4,701. However, if your credit union offers the same loan with a 6.5% interest rate, your monthly payment would be $483.32, and your total interest charges would amount to $3,999, leading to a few hundred dollars in savings.

The numbers make shopping around for a car loan across credit unions worthwhile.

Before you head to the car lot, getting pre-approved financing can serve as a key negotiation strategy.

Simply let the salesperson know that you have a loan lined up with a maximum price point. If you are preapproved for a certain amount, the salesperson might match or beat the other offer in order to get your business. Plus, this will help you stay firm within your budget.

Additionally, you can also ask the dealership directly to beat the loan's interest rate. It never hurts to ask, and in some cases, this could save you hundreds or thousands of dollars.

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As you negotiate with the car dealership, focus on the total price instead of the monthly payment. Dealerships will often tinker with the monthly payment to suit your budget, but that could mean a longer loan term or higher interest rate, which ultimately could end up costing you more in the long run.

While the details vary based on your situation, this could save you hundreds or thousands of dollars over the loan term.

Dealerships typically have monthly or quarterly quotas to meet. If they haven't hit the quota toward the end of the period, they may offer incentives to help close more sales.

Depending on the situation, you might find lower interest rates, lower price points, lease deals, or cash rebates. With that, timing your car purchase to the end of a month or quarter could lead to some savings.

According to Kelley Blue Book, new-vehicle sales incentives at the end of 2024 equaled approximately $3,958 in savings. That means you could save thousands of dollars by taking advantage of them.

When you start scoping out vehicles on the car lot, it's easy to get drawn in by the extra features. Unfortunately, saying yes to those extra features could add hundreds or thousands of dollars to your bill.

Though prices vary across dealers, opting for VIN etching, for example, could cost at least $200, according to Consumer Reports. Rustproofing could easily be $800, and extended warranty coverage can easily add $2,000 to the final price on the high end.

As you shop, make it a point to decline any extra options.

When shopping for a car, you may have the option to buy or lease it. While buying a car is often more expensive on a month-to-month basis, you'll own it at the end of your loan term. In contrast, a monthly lease payment could be cheaper, but you'll have to turn it in at the end of the term.

Take some time to run the numbers on your unique situation. Depending on your goals, you might tap into monthly savings through a lease or long-term savings through a purchase.

While it can be difficult to make a direct savings comparison between a six-year loan, for example, and the standard three-year lease, according to Edmunds, the average new-car loan came with a $736 monthly payment. The average payment for a new lease was $595, according to Experian. Depending on your goals, you could save hundreds.

Generally, you'll need to make a down payment between 10% to 20% of your vehicle's purchase price. But making a larger down payment can help you lower your loan amount and total interest charges.

For example, let's say you take out a 60-month loan with a 7% interest rate for $25,000. This would lead to a monthly payment of $495.03 and total interest charges of $4,701. But if you make a 50% down payment, lowering the loan amount to $12,500, your monthly payment would be $247.51, and you'd pay $2,350 in interest.

Of course, saving up for a bigger down payment could take time. But the delay could lead to saving thousands of dollars.

If you're planning to trade in your old vehicle, timing it around the spring or summer could lead to higher trade-in offers. Of course, this varies based on your vehicle, but trading in your old car at the right time could lead to hundreds of dollars in value, which you can use to offset the price of your next vehicle.

Additionally, many states offer tax credits that let buyers pay sales tax only on the difference between the price of the new car and the trade-in value of the old one. While the tax rates vary by state, it could save shoppers thousands of dollars.

For many, negotiating the details of a car purchase in person can feel daunting. After all, it can be difficult to keep up with all the variables involved. If you aren't comfortable negotiating in person, consider conducting your negotiations from afar.

You can usually conduct negotiations via phone or email, which might help you stick to your guns. In some cases, this could lead to hundreds or thousands saved.

A car warranty can cover a wide range of issues that may arise. For example, it might cover components of the powertrain or other critical engine parts. Without the warranty, you could face a repair bill of hundreds or thousands when something goes wrong.

While the dealership may not be willing to lower the price of the vehicle, they may have some wiggle room with a discount on the extended warranty instead. Even though it's not in the sticker price, it can still reduce your overall purchase cost.

Some dealerships may also lower your interest rate if you agree to finance an extended warranty. If possible, negotiate for a longer warranty period to insulate your wallet from costly vehicle repairs for the long term.

Locking in your auto loan doesn't mean you can't make any changes. Instead, you always have the option to refinance. If market conditions change and interest rates drop, refinancing could save you hundreds or thousands on interest charges.

According to RateGenius's most recent State of Auto Refinance report, customers saved an average of $1,158 per year after refinancing their auto loans, and one in five borrowers who refinanced their auto loans had their monthly payment reduced by at least $150.

But before committing to a refinance, confirm the potential savings outweigh any fees you'll face upfront.

Even if you're confident you got a great deal on your car and the financing, making extra payments during your loan term can lower your total interest charges.

For example, let's say you take out a 60-month loan with a 7% interest rate for $25,000. This would lead to a monthly payment of $495.03 and total interest charges of $4,701. If you make extra payments of $100 per month, you'd pay off the loan 11 months early and save $939.

Using a combination of car financing tricks can help you save big on your next car purchase, just like getting multiple quotes or bundling policies can help you save money on car insurance. Don't be afraid to try the strategies above as you navigate a car purchase.

Getting a great deal is a good start, but the purchase price of your car is just the beginning of your car costs. According to J.D. Power, approximately 17% of people's annual expenses go toward transportation, which includes things like maintaining vehicles and buying fuel. This means you'll also need to fit things like car insurance, gas, and maintenance into your budget.