LendingTree Academy

Auto loan hacks from LendingTree’s car connoisseur

Written by

Jonathan McFadden


September 5, 2019

Given her history with cars, it’s a tad ironic Esther Barragan is LendingTree’s top auto financing expert. The door to her first car, a Volkswagen Jetta, slammed into her head while parked on a hill (more on that later). Another car stalled at an intersection. A third shut down on the freeway.

Despite those less-than-stellar experiences, Esther is a senior product manager who makes it easier for our customers to find their best deals on auto loans. She shared some tips and tricks on how to snag car financing and haggle at the dealership.

Pick a price and stick to it

If you’re getting car financing at the dealership, make sure the dealer sees you as financially-savvy. Settle on the price of the car before you talk financing. If you have your own financing because you have a great relationship with your bank, don’t let the dealer know that until you’ve come to an agreement on the price of the car. Otherwise, they’ll think they have less opportunity to make money and they’ll be less willing to negotiate on the price.

Play it cool

The dealer is sizing you up when you go in. They’re trying to figure out how much they can charge you. I’ve actually negotiated for cars via text or email. It’s helpful if they think you don’t have to buy a car. Even if you desperately need a car, don’t let them know. Take a friend with a car with you to the dealership. Let the dealer think that’s your car and your friend is there for moral support.

Figure out your goals

Why are you getting your car? Is it something you’re going to drive into the ground or just keep for a couple of years because it suits your needs for now? If it’s something you’ll drive forever, then total cost of financing and total cost of ownership might be more important to you than just the monthly payment.

Look at the term and APR (annual percentage rate), which is what it costs you to borrow the money. I always look at the APR. You have to weigh that against the payment. Two percent APR for three years on a pricey car might not be the best payment. Even if the payment’s the same (between two cars), that doesn’t mean you’re getting the same deal. You could end up paying a much higher interest rate over a longer term. That’s one way dealers maximize their profit.

Consider gap insurance

Just like houses, cars have equity (the difference between the value of the car if you sold it and how much you still owe). It’s pretty normal to be upside down (or owe more than what the car is worth) on an auto. Especially if you put a lot of miles on a car, it’s going to depreciate quickly. If it’s a new car — unless it’s some sort of specialty, collectible or rare vehicle — you’re going to lose thousands of dollars the minute you drive it off the lot.

People who are unable to put a lot down on their car, but still want to make sure they keep a stable payment, can buy gap insurance.

If your car gets totaled, you’ll still owe the bank, and your insurance company will give you a relatively low amount because of the car’s depreciation. You’ll end up owing more than the insurance gave you, plus you’ll need a new car.

Gap insurance literally fills the gap between what you owe and what the insurance company gives you. If you go this route, make sure you check how much coverage you’re actually getting; gap insurance has limits. If you choose the lowest tier, it may only cover part of your gap. Know the maximum coverage for the insurance you’re buying.

Pay extra when you can

As you’re paying off your car loan, pay a bit above your minimum monthly payment. Doing that can take a year off your loan, even if it’s $50 more a month. That’s because you’re applying more money to your overall principal balance, which can help reduce how much you’ll pay in interest over the remaining life of your loan. I hate having a car payment and I’m paying it down as quickly as I can.

Negotiate your car yourself

For the first car I bought, a friend helped me negotiate with the dealer. It was a disaster. He negotiated a price for me the bank wouldn’t underwrite. Even with what I put down, I “negotiated” a price that was far higher than what the car was worth.

Inspect the design – inside and out

That first car was awful. It was a Jetta. It had this feature where you hooked the seatbelt and it would move back to cover your chest and torso automatically. It was connected to the door. One day, I parked it on a hill. As I was getting out, the seatbelt pulled the very heavy door until it shut and hit my head, jamming it between the door and the car. I hated that car.

That’s why you should pay close attention to the car’s controls, features and instrument panel design. It’s really important the car suits your needs. Cars are personal; they need to suit your lifestyle. A vehicle with a lot of horsepower is great, but if what you really need is the built-in vacuum cleaner, make that a priority.

I like cars that are fun to drive. I want phenomenal design. It doesn’t have to be a fancy car, but it needs to be well-designed. The Jetta did not fall into that category.

Shop at the end of the month

At the end of the month, dealers are more willing to negotiate. Each month, they need to move a certain number of cars out of their inventory. As long as they see you’re a serious buyer, they’ll negotiate with you.

I’ve gone into a dealership a couple of days before the end of the month to look around, find the car I like, test drive it and then walk away. Then, on the last day of the month, I reach back out and tell the dealer I’ll give them a certain price and I’ll be there to pick it up at a certain time. They’ve always agreed.

You can always go through LendingTree’s process to see what rates you qualify for. Check out the LendingTree app to find auto lenders offering competitive rates. We have partners who will work with borrowers in all credit tiers, whether they have excellent or extremely low scores, or no score at all.