When I purchased my new 2015 Mazda 3, the dealership advertised a 36 month 0% interest auto loan, with no payments in the first 90 days and nothing due at signing. Sounds like a great deal! However, if you took the standard 3.99% rate through Mazda Capital Services and Chase Bank, they throw in a $750 credit on the purchase of the vehicle, lowering the price by $750.

If you can get a 0% loan, awesome. If you can’t, you may as well be paid $750 for taking a loan at a bad interest rate, especially when there was no prepayment penalty on the loan. I elected to take the 4% loan and the $750 credit up front. I read the fine print at the dealership and it clearly stated that there was no prepayment penalty for paying off the loan early.

This was the point when the car salesman and loan issuer I was dealing at the dealership straight up lied to me: they both told me I couldn’t repay the full loan before 3 payments (or 3 months) or I would lose the $750 credit. This simply wasn’t true! I believe the reason they told me this was because if you pay the loan off before 3 payments, the dealership doesn’t get their kickback from the loan company, in this case Mazda Capital Services through Chase Bank.

I waited until I picked up my license plates at the dealership and then immediately called USAA to refinance my auto loan. The best loan rate they were offering was 1.79% for 36 months. However, I was able to lock in a 1.29% loan with USAA, saving me nearly $1000 in interest over the course of the three year loan (compared to the 3.99% Mazda Capital Services loan). I didn’t even have to make my first payment until 3 months after I purchased the vehicle. Here’s how I negotiated the best loan rate I could find.

The Best Loan Negotiation Trick

In any negotiation, you either have to ask for freebies that don’t cost the other party anything or you need to offer something to the other party to get what you want. In the case of negotiating a interest rate, really the only thing you can ask for is a lower rate and the only thing you can offer is your business. However, when you bring in a competitors rates, you remind the other party that you’ll just go to a competitor if they can’t meet or beat the best market rate.

When I called USAA to try to negotiate a lower auto loan, I had done my research. USAA was offering 1.79% 36 month loans on new cars or 1.29% if you purchased the vehicle through their USAA TrueCar service. (Don’t do this. Take the number you get from USAA’s Car Buying Service and negotiate a better price on your next car with a few quick emails).

PenFed was offering 1.49% on new auto loans for 36 months. So when I called USAA to refinance my Chase Bank 3.99% loan, I simply asked if they would be willing to beat PenFed’s 1.49% rate and keep me as a customer. The conversation went like this:

• USAA Rep: Thanks for calling USAA today, Captain. How can I assist you today?
• Me: Thanks. I’m calling to refinance my auto loan.
• USAA: Ok let’s see. It looks like you qualify for our lowest rate at 1.79%!
• Me: Oh that’s great! Hey I saw on PenFed’s website that they are offering 1.49% loans. Would you be willing to match or beat this rate? I would love to keep my business with USAA but I can’t ignore PenFed’s lower rate.
• USAA: Sure let me check…I can offer you a 1.29% rate, would that be acceptable?
• Me: It sure would, thanks for checking!

So easy. I posed a simple, polite question, quoted a competitor’s better rate, and reminded the rep that I wanted to give USAA my business. I got my 3.99% loan loan turned into a 1.29% loan, saving me $1000 in interest. Of course it helps having a credit score over 800 as well.

How about you reader? What other techniques have you used to negotiate the best auto loan, mortgage, student loans, or personal loans?