How dealer financing actually works
The dealer is a loan broker. They send your application to multiple lenders (captive, banks, credit unions). The lender returns a 'buy rate'; the dealer adds 1-2.5 points of markup and quotes you that 'sell rate'. The markup is split between dealer and lender. You can decline financing entirely and pay cash or bring your own loan.
The 20/4/10 rule
20% down payment minimum. 4-year (48-month) maximum term. Total transportation costs (loan, insurance, fuel, maintenance) under 10% of gross monthly income. This combination keeps you above water on equity through the loan and out of the 'underwater' trap that 72/84-month buyers fall into in year 3.
Why long loans are a trap
On a 72-month loan, a typical buyer is underwater (owes more than the car is worth) for the first 36-48 months. Total a car in year 2 and insurance pays book value — you write the dealer a check for the gap. GAP insurance covers this but costs $500-700 if bought from the dealer; ~$20-50/yr added to a regular policy.
Pre-approval is your leverage
Apply at your primary bank and one credit union (PenFed, Navy Federal, your state credit union) before visiting a dealer. Bring the pre-approval letter. The dealer's F&I office will try to beat it — let them. If they cannot, use your pre-approval. Pre-approvals lock for 30 days; multiple auto loan inquiries within 14 days count as one credit pull.
The F&I office: what to decline
Decline: extended warranties priced over $1,500 (third-party warranties are 40-60% cheaper outside the dealership), paint/fabric protection ($800-1,200 for $50 of work), nitrogen tire fill, VIN etching, and theft-tracking add-ons. Keep on the table: GAP insurance for long loans, a manufacturer-backed extended warranty on a complex vehicle, and tire/wheel protection if you live in a pothole state.