The Sweetest Rate

By Jean Chatzky

Customers had more complaints about buying a car last year than they did about any other transaction, according to consumer advocates. But shopping for a car and the financing to go with it is not all that tough once you understand that just as buying a house is a completely separate process from finding a mortgage, getting the best rate on a car loan has absolutely nothing to do with getting the best price on a car. That knowledge--and the ability to stick to your guns in a negotiation--puts you right back in the driver's seat, says Remar Sutton, author of Don't Get Taken Every Time: The Ultimate Guide to Buying or Leasing a Car in the Showroom or on the Internet. What else do you need to do?

KNOW YOUR SCORE Before you head to a car showroom, you should know what you would have to pay for financing from another source. You can get a ball-park figure at Bankrate.com which posts current averages of loan rates for used and new cars. But whether you would qualify for those average rates or pay substantially more depends on your credit score. Only people with scores of 720 or more typically qualify for the best rates. If you don't know your score, you can get it for $29.95 from myfico.com

STACK YOUR HAND Although it's never a bad idea to check with your bank, you are likely to find the best rate from an online lender that specializes in auto financing. Market leader Capital One Auto Financing (capitalone. com) is currently offering a 36-month new-car loan at 3.85% and a 60-month loan at 4.29%. The other place to snag a good deal is from a credit union. The average rate credit unions charge on a 48-month new-car loan is 4.7% (the average bank rate is 6.5 %). You have to join a credit union to get these rates. The Credit Union National Association website cuna.org has a search engine to help you find one.

READY, SET, SHOP Now it's time to head to the dealer. First, you negotiate on the car and divulge as little about your situation as you can, says James Walsh, author of Smart Wheels, Hot Deals. Don't say whether you have a trade-in, how much money you're putting down, how much you want to pay a month or how you plan to finance the car. Just say, Let's talk about price. Only when you have settled on a number, do you say, I'd like to talk about financing. The dealer will tell you what rates are available. Then use the rate in your back pocket to see if you can finagle a better deal.

KNOW THE TRADE-OFFS If there are manufacturer's incentives, you may be offered a choice of a sweet rate or a rebate. If so, it's back to the Web, this time to Edmunds.com where a handy rebate-vs.-incentive calculator can help you figure out which to take.