Getting a new car requires decision making on how to pay for it. Fortunately, there is a way to get the best financing in place so you can concentrate on selecting a safe and reliable vehicle: Get pre-approved for an auto loan before you start searching for cars if you're going to have a car loan.
Here, we share with you some benefits when you get pre-approved for an auto loan.
#1: Find out what lenders are able to give you.
Preapproval for an auto loan will help you set reasonable standards for how much you can pay. When you get a preapproval for an auto loan, the lender sends you a quote for how much you can borrow, which could include the vehicle, title, taxes, and other fees.
You'll also get an idea of what your interest rate and loan terms will be so you can figure out how much your monthly car payment will be and plan accordingly. You don't have to apply for the full sum you've been preapproved for. In certain situations, borrowing less if possible is a smart option after you factor in the rest of your expenses. It's ultimately up to you to determine how much you can comfortably borrow.
#2: Obtain negotiation power.
Although there are many decent car dealerships out there, some customers are wary of salespeople and the industry as a whole. Since you never know who you'll be working with, getting a pre-approval loan increases your chances of bargaining over what matters most: pricing of your new vehicle.
Dealers can try to draw your attention to whether you can afford to pay the monthly payment. They'll have more freedom to change other aspects of the contract this way. Several factors go into calculation of your monthly payment:
- The loan amount
- Loan term (how many years)
- The interest rate.
They will try to squeeze some money out of you once you agree to a payment by manipulating those three variables. There are no games to play when you go in for a pre-approved car loan because the monthly payment is none of the dealer's business. You and your lender have already settled on the terms of the loan; now the dealer must determine if your offer to purchase is sufficient to persuade them to sell the vehicle.
#3: Avoid price markups at the dealership
You may be tempted to use the dealership's lending scheme if you haven't been pre-approved for a loan sum by a third-party lender. “Many times, the dealer offers special financing, such as the 0% plans we've all seen advertised,” says Garraway, an underwriting manager at Amplify Credit Union. Deals like that are hard to pass up, but dealerships sometimes fail to report markups and upsells, which can result in paying much more than you expected.
“Do not believe a dealer who tells you that the only way to get the 0% or other low prices is to buy more products,” Garraway advises. And if you want add-ons like distance policy or warranty, you can always get them for less money if you shop around.
#4: Keep your choices open — you are not obligated to use any lender who has pre-approved while gathering useful details.
You are limited to the inventory that a dealership has on hand if you find a fair interest rate with them. If the car you want isn't available there, you won't be given a similar deal at the dealership next door. Loan pre-approval, on the other hand, comes from a third-party institution, which means you can buy the car from whoever you want.
If you're in the hunt for a new vehicle, being pre approved for a loan will help. When you step through the dealership doors, you'll have peace of mind knowing that you have other financing choices. This will give you the upper hand in negotiations and allow you to resist any markups or upsells that a dealer will attempt to enforce. But, keep in mind that pre-approvals are only valid for a limited time. Pre-approvals usually last less than 60 days, so just apply for pre-approved loans when you're ready to purchase. Furthermore, hard inquiries on your credit report can have a negative effect on your credit score, so you'll want to hold off on making a purchase until you're ready. And if you ever want your loan to be pre-approved, don't worry! With Autosentral, we can help you to check your financial status and get your loan pre-approved. Just click the link below to get free counselling!