The Right Order to Buy a Car Without Hurting Your Credit

I worked as a car salesman, then as a finance manager, then as director of the finance department. I know exactly where the margin lives, and it is not in the sticker price.

Get financing before you get excited

Walk into your bank or credit union first and get a pre-approval with an actual rate. Now you are not asking the dealer to find you money, you are giving them a number to beat. Sometimes they beat it, because manufacturers subsidise rates. Either way you win, and the conversation starts from your terms.

Negotiate one thing at a time

The four-square worksheet exists to blend the price, the trade-in, the down payment and the monthly payment into one fog where a concession in one column is paid for in another. Settle the out-the-door price of the car. Then, and only then, discuss the trade. Then financing.

Any question about your monthly payment before the price is settled is not a question, it is a technique.

Watch the term, not the payment

A payment that fits your budget can hide an eighty-four month term that leaves you owing more than the car is worth for four years. Sixty months is a reasonable ceiling. If the car only fits in your life at eighty-four months, it is not the right car.

Keep your credit inquiries tight

• Do all your auto shopping inside a fourteen-day window; the scoring models treat it as one inquiry.
• Do not let every dealer on the strip run your report separately over three weeks.
• Do not apply for a credit card the same month. A new account right before funding can kill the deal.

The car you buy correctly finances the next thing you want. The car you buy in the wrong order blocks it for years.