Whether you are trying to save up or borrow the money, it is always a good idea to investigate and shop around for a better deal. Although the difference between the conditions offered by different financial institutions may not be extreme, it may still be significant enough.

Consider a scenario

For example, you decide to finance a car and decide to go with a 2015 Honda Civic. The price range for this type of vehicle is between $12,000 and $20,000 + sales tax. The price depends on the mileage of the vehicle, its features, possible damage, etc.

The one that you like is $18,991 + sales tax.

Now you want to start investigating which financial institution will give you the best deal.

Bank A offers the following conditions: 

Total Price of Vehicle: $18,991 + sales tax

No down payment, no trade-in

On Approved Credit based on a 4.99 % rate compounded  and 60 months term. 

Monthly payment amount (sales tax included): $405

Bank B (where you have two other accounts) offers the following conditions:

Total Price of Vehicle: $18,991 + sales tax

No down payment, no trade-in

On Approved Credit based on a 5.99 % and 72 months term. Sales tax not included. 

Monthly payment amount (sales tax included): $356

The dealership where the vehicle is being sold offers the following conditions:

Total Price of Vehicle: $18,991 + sales tax

No down payment, no trade-in

On Approved Credit based on a 6.99 % and 60 months term. Sales tax not included. 

In addition, 5 free oil changes ($500 value).

Monthly payment amount (sales tax included): $425

car dealership negotiating price

Comparing and negotiating

Let’s consider all of the options above, decide which one is the best deal and discuss how to negotiate.

Bank A offers a good rate and a reasonable time to repay the loan. It is also a bank, where you have no accounts yet and they would be interested in trying to get a new customer. Thus, you ask them, as a new customer, to lower the rate a bit more. But if the conditions are already pretty good, this may be as good as it could get. Going with a new bank may mean a bit more hustle for you, as you would have to track your accounts in two financial institutions now.

Bank B is a bank where you already have two accounts and you could definitely ask them to give you better car financing conditions since you have been their loyal customer. Compared to the Bank A offer, Bank B offer is not that great, you would be paying more in interest and you would own your vehicle much later, too. However, you can take the option that Bank A offers and bring it to your bank, asking them to match it to keep you as their customer for this transaction. There is a very high chance that Bank B will match Bank A’s offer to please you.

However, there is one more offer on the table for you and it’s worth taking a good look at it.

Although the rate is higher than the rates offered by the two banks, the dealership is prepared to give you free oil change service valued at $500.

So, if you pay $425/month for 60 months it would add up to $25,500. Take away the $500 from this amount and you would have paid $25,000 by the end of the term.

With Bank A the total would be $24,300 and with Bank B it would be $25,632.

So, the dealership is offering you a better deal than Bank B, but Bank A’s offer is still the best.

It is worth a try to then go to the dealership with the Bank A offer and still ask for the 5 free oil changes. Most dealerships don’t mind offering a few free car maintenance services as they are hoping that when you need a bigger repair or would like to get a new vehicle, you would come to them.

It is important not to be afraid to ask, as long as it is not too out of line. The worst that could happen is that they will say no and you will just go with the best option at hand. 

Researching, comparing and negotiating opportunities and offers is an important component of financial success. It is always worth it to spend a little bit more time to get multiple offers and it is always worth asking if the deal could be even better.