How to Finance a New Vehicle

Step 1: Choose the vehicle that you want.
Choose the vehicle that you want, echo, echo.

Step 2: Check the incentives.
Now that you know what vehicle you want, check to see if any special financing rates are available it.  Manufacturers often offer special supported interest rates, such as 0% for up to 3 years, 2.9% for 5 years, etc..., on new vehicles to help boost their sales.  You can find out if there are any special interest rates available on the car or truck that you want by stopping by the incentives section of Edmunds.com: Edmunds.com - New Vehicle Incentives.

Step 3: Decide how long you want to finance it for.
Next you have to decide how long you want to finance your new vehicle for.  Generally speaking, the longer you finance for, the lower your monthly payment will be.  However, the longer you finance for, the longer you will be upside down on your car or truck (owe more on your loan than it is worth on the open market).  If a special finance rate is available on the car or truck you want, it may have an impact upon how long a term you choose.

Step 4: Decide how large a down payment you want to make.
In addition to how long you want to finance for, you also have to decide how large a down payment you want to make on your new vehicle.  If you are taking advantage of a special financing rate, you will want to put as little money down as possible to take full advantage of the savings that it provides.  You would be much better of investing any down payment that you would have made and financing your entire vehicle at say 0% or 2.9%.  If no special rate is available on the model that you want, then you will be better off making a fairly large down payment on it.  A large down payment will save you money by reducing the amount of interest you will have to pay and it will make you less upside down on your vehicle.

Step 5: Get pre-approved to finance it through an independent bank.
If there is no special financing rate available on the model that you want, it is a good idea to get pre-approved to finance it through a local bank, credit union, or a bank that does business on-line.  Getting pre-approved serves two purposes.  One, it gives you an idea of what sort of interest rate you qualify for.  Two, it often motivates dealers to try to beat the rate that you have already been quoted.

Step 6: Negotiate the selling price.
Don't worry about your vehicle's monthly payment yet, instead focus on negotiating a low selling price.  If you negotiate a low price and get a good interest rate the payment will take care of itself. 

Step 7: See if the dealer can beat your rate
Once you have negotiated a price that you are happy with, if you are not taking advantage of a special interest rate that is being provided by your vehicle's manufacturer, see if the dealer that you are getting your vehicle from can beat the rate that you have already been approved at.  If so, great.  If not, then just finance through the bank that you are already approved with.

Step 8: Enjoy
You've put in all the work, now it's time to enjoy your new vehicle.

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