Make time to get pre-approved for a car loan before you start shopping for a vehicle. Why? We’ll explain below:
-It’s better to be shocked, either by the rate of interest you are offered or whether you’ll receive approval, before you step foot into a dealership. If there are any major issues with your credit score or eligibility, you can address them ahead of time.
– Pre-approval for an auto loan offers you negotiating power at the dealership, allowing you to secure the best interest rate available.
A pre-approval letter from your lender will encourage the dealer to attempt to beat or match the rate and terms.
-Pre-approval gives you confidence that you have obtained the best rate available.
Before you go to the dealership, you can easily apply for pre-approval for a car loan through credit unions, banks, or online lenders.
Why It’s Wise to Get Pre-Approved for An Auto Loan
It Helps You Set a Realistic Budget
Getting pre-approval will help you set a budget for your car purchase since it lets you know exactly how much you can borrow from the lender and at what rate.
When you get your pre-approval letter, it doesn’t mean you should buy any car with a price tag up to that amount. You must account for taxes and fees, which can make up for at least 10% of the purchase price. Any down payment or trade-in value will help offset the cost.
Protects You from Markups
Dealership financing is convenient, but if you don’t have a pre-approval letter, a dealership’s finance manager may leverage this by raising your interest rate. Dealers work with a variety of lenders at predetermined rates for a certain financial profile. They can add a set amount to your approved rate, up to 1 or 2 percentage points. Over the life of your loan, this can amount to thousands of dollars.
Allows You to Negotiate
With your lender-approved blank check or certificate in hand, you’re essentially a “cash buyer” at the auto lot, giving you a considerably better negotiating position. You already know what your monthly payment for your loan amount will be, so you won’t have to haggle with the dealer.
