Arrange your financing

Don't wait until you're at the dealership to think about financing

Compare interest rates at banks, credit unions, and other financing institutions. Also, call dealerships to see how their rates compare. Being preapproved for a loan removes much of the stress during the negotiating phase.

Expert tip

It's best to pay off your old auto loan before you buy a new car. Rolling over the unpaid portion of an old loan into a new one will increase the amount of interest you pay and make it easier to get upside-down on your loan, so you'll owe more than the car is worth.

Red flag

When arranging a loan, dealers often make extra profit by bumping your interest rate up several percentage points over the rate for which you would normally qualify. That's why it's critical that you compare interest rates before you go to the dealership.