Dear Lifehacker, I bought a new car last year, and got financed by the dealer at about 6 per cent, which at the time I thought was good. I noticed they are now having a sale with 1 per cent finance. Is it too early to try and renegotiate my loan? Thanks, Over Charged
Car sale picture from Shutterstock
Our golden rule for consumers is a simple one: it never hurts to ask. The worst that can happen is that the provider will say no.
Having said that, we suspect very much that the answer will be 'no' in this case. Market conditions were different six months ago, and 6 per cent may well have represented the best available rate for financing at the time. You signed a contract for a loan, and you have to honour that contract at the agreed rate. (That makes for a different situation to buying something outright and then seeing it on sale just a week or two later.)
Yes, the interest rate has changed for more recent purchasers, but that's often what happens. Overall interest rates move frequently, but those which apply to fixed-rate loans don't. The lesson? Before you sign any form of loan contract, you have to be happy that it represents a reasonable deal from your perspective for the length of the contract. It isn't a shiftable entity.
Some other related observations:
- While you sourced your finance through a car dealer, they're almost certainly acting as an agent for a finance company, and their ability to actually change any of those details is likely to be non-existent as a result.
- That lack of flexibility means dealers are rarely the cheapest source of finance for a car purchase. Shop around before signing up and see if you can get a better interest rate from a bank or credit union. Ideally, do this before you start shopping for the car; that way, you'll know your budget before you begin and won't be tempted to spend more through high-pressure sales tactics.
- The small print on the '1% deal' might be quite different to what you're already signed up for; for instance, I wouldn't be surprised if the rate only applies for a limited period, after which it could jump up to a much higher level. Other sneaky details to check for: high loan establishment fees or service charges. It's also possible the 1 per cent arrangement only applies to particular models.
Again: asking won't result in higher repayments, so you may as well try. But don't be disappointed if the result is no change.
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