4 Realities Women Need to Be Aware of When Shopping for a Car Loan

My wife and I have decided it’s just easier if I do the negotiating when shopping for a car.

That’s a sad statement – especially considering it comes on Women’s Money Week. My wife is just as good at math as I am. Neither of us is particularly knowledgeable about cars. We can both read online reviews. It’s perfectly reasonable to ask why in this day an age of equality we would choose to default to traditional norms.

The truth is that it’s just easier. Even though we live in a relatively equal time, when it comes to negotiating and the testosterone-driven world of finance and vehicles we still have some substantial room for growth. I certainly don’t enjoy the art of haggling with car salesman and loans people, so if my wife ever decides she wants to take the reins, I’d be more than happy to hand them over. For the time being though, it’s a sad fact that I get more respect than she does when we walk into most car dealerships and banks. In fact, many dealers quote women higher car prices.

My wife and I aren’t alone when it comes to noticing that women don’t get treated fairly when it comes to negotiating on a vehicle price or car loan rate. While we would certainly like to see the industry change sooner rather than later, here are a few tips you can use to even the playing field in the meantime.

1. Become familiar with the terminology

You can’t negotiate if you don’t know what you want. In many cases the car industry banks on the fact that people don’t understand what they’re talking about. Figuring out what features you most enjoy in a vehicle is a good first step. Educating yourself online or by chatting with a friend that is mechanically inclined is a great way to get to know the basic names of the features you can’t live without, and the stuff you don’t need and/or won’t pay extra for.

Similarly, when it comes to negotiating the best rate on a car loan, you should understand concepts like the difference between APR financing and basic interest rates. It is often assumed that men know more about this than women, even though it’s probably more apt to say that very few people are familiar with these terms, period. Know what sort of insurance options and “extras” are being rolled into your loan and how much of a difference a small change to an interest rate can make.

2. Don’t let the math fool you when shopping for a car

Clever salespeople know that basic human psychology often trumps general math awareness. This is why we see bi-weekly long-term car loans advertised. If car dealerships stretch out a loan over more than five years, and then break the monthly payment down into bi-weekly payments, they know that much smaller number is easier to rationalize for the consumer.

It’s also to their advantage. You’re way better off negotiating the overall price of the vehicle and then going from there. Don’t be fooled by mathematical tricks designed to make small numbers look appealing while dulling the sticker shock of paying thousands of dollars for a major purchase.

3. Negotiation isn’t about comfort

I’m not sure if it is just basic sexism, or if some of it can be explained by women’s general tendency to approach problem solving from less confrontational standpoint, but for some reason(s) it has become common practice to try to take advantage of women when it comes to negotiating. Part of it is likely because women are socialized to be accommodating, whether it has to do with their money or any other issue. That carries over into shopping for a car loan.

I don’t purport to be a master negotiator. I’m sure there are books written by corporate gurus that can wax poetic about negotiating psychology and how to gain the ultimate upper hand. Go ahead and read them if you have the time. What I do know is that the folks that sell cars and deal with car loans spend their whole day negotiating. They negotiate thousands of deals in a lifetime. You will likely buy between six and 12 vehicles during that time.

One outcome of this massive disparity is that the pros are much more comfortable dealing with the inherent discomfort of negotiation. It’s important to realize going into the negotiation that the other side is not your friend or ally no matter what they say. Your goal is to pay the least amount possible for a vehicle and/or a car loan. A dealership’s goal is to get as much of your money as possible, while possibly still giving you a positive experience and securing your long-term business.

Those two positions are pretty mutually exclusive, whether you are getting a car loan to help pay for your purchase or not. Hopefully, an outcome that is acceptable to both of you can be reached with minimal animosity, but you should mentally prepare yourself for the reality that the situation isn’t likely to be comfortable, and that you will be probably feel that lack of comfort far more than the person sitting across from you.

4. Know your leverage and do your research

Generally, male or female, what type of vehicle and financing agreement you end up with is often determined by the time and energy you’re willing to put into understand the market. The Internet has made this easier than ever before, but there is still something to be said for picking up a
phone and comparing deals from separate dealerships while shopping for a car.

In my experience, the quickest way for women (or anyone, really) to gain respect from a car salesman or banker is to show them that they have done their research and know what a good deal will look like. If you can say, “I was just talking to competitor X, and they offered me Y. While I really like your brand and business, you have to offer me something competitive,” this strongly conveys that you will not be taken advantage of. It’s also the best way I know to ensure that you get a good competitive deal when getting a car loan.

It is unfortunate that, statistically speaking, it is likely to take a woman longer to negotiate this competitive agreement than a man, but if you ultimately want the best deal, you have to be willing to do some research and know how much leverage you have.