Most prospective car buyers are afraid of getting cheated by car dealers, so much so that they don’t pay attention to the auto financing process, which is more confusing and a great avenue for consumers to be taken advantage of.
But you can easily circumvent this problem by applying for a pre-approved auto loan from a traditional lender such as a bank or credit union before you go shopping for a vehicle. By doing so, you’ll protect you from getting swindled by an auto finance manager.
The auto financing process is generally unclear to consumers. So, it’s easier to get a raw deal without your knowledge, and before you know it, you’re paying more for your dream car.
The good thing is many car dealers today are favoring pre-approved loans. This helps you get a better car rate than what you already have in mind. Here are five clear reasons getting a pre-approved car loan works so well for prospective car buyers like you.
1. You Become Aware of Your Credit Problems Beforehand
Just because you have a good credit history doesn’t mean you’re always on time in paying your bills. There are days you’ll miss making timely payments, and though those days are ever so few and far between, you’ll quickly ding your credit in the process.
So by applying for a pre-approved auto loan, you become aware of all your credit problems beforehand, or rather before you walk into a car dealership.
The first thing to do? Get your credit score rating in order? Is your score lower or higher? If higher, it means you’ll get low-interest rates on your auto loan, which is, fortunately, a good thing.
But if your credit score rating is plummeting, look into any credit problems you may have then repair them. By doing so, you stand a greater chance of securing a pre-approved loan with ideal interest rates.
In fact, applying for a loan ahead of time helps you see an estimate of the rates you qualify for before you set to buy your dream car. You can also apply for a pre-approved loan with a soft credit inquiry, but only a few lenders will allow this. The sad news? It lowers your score.
2. You Make Informed Financial Decisions
When you get your car loan pre-approved, you can sample different car loan terms to ensure you have the right fit. Why? Because you now know how much you’re eligible to borrow.
It’s a wise way to make better financial decisions. After all, you know your budget well. You literally know how much monthly payment you’ll need to remit. Use this knowledge to ‘play around’ with different loan terms. Try a handful of loan offers, lifespans, and down payments until you find what you need. Or rather, the best car loan that fits your budget.
When you sample different loan terms when you’re relaxed, as opposed to when you’re at the dealer’s shop, you have a greater advantage. And more likely to make an informed decision.
3. You Come Across as an Informed Car Buyer
When you apply for a loan ahead of time, it paints a picture [to the salesperson] of a buyer who understands what they’re doing. A buyer whose level of knowledge speaks volumes.
Remember, car salespeople, are trained to exploit your lack of knowledge and understanding of the buying process. So by getting your car loan pre-approved beforehand, you come across as a prospective buyer who understands and knows what they’re looking for.
This hence reduces your chances of getting swindled and instead allows you to gain more control in the car negotiations, which, of course, leads to getting a better car deal.
4. You Strengthen Your Position and Simplify Negotiations
Ever noticed how salespeople throw the “what monthly payments will fit your budget” question immediately they sniff your interest on the displayed vehicle?
Most car buyers usually front a figure, which the salesperson goes ahead to work with and find you the right vehicle that fits your budget. It’s at this moment they’ll juggle more numbers your way and most likely overcharge you.
Now imagine getting your car loan pre-approved beforehand. You turn the table around that allows you to deflect their question with an “I have cash – so tell me how much the vehicle will cost me” statement.
Pre-approval strengthens your buying position and simplifies car negotiations. You can easily save time and go straight to talking about the cost of the car. Then again, pre-approvals help you separate car-buying transactions – you know, trading-in, auto financing, and the actual buying of the vehicle.
These are three separate transactions. If you’re like most buyers, you’ll get confused by the said transactions and end up getting a raw deal on one or all of them.
5. You Beat the Dealers Rate
Car dealers are an intelligent lot. They dangle low auto financing interest rates to prospective buyers to gain an upper hand. That’s because they have access to some of the lowest car loan rates in the market.
But if you approve your loan ahead of time, you can beat them anytime because they have to compete to sell for you. They’ll compete to do business with you.
To tip the scales in their favor, a salesperson is likely to ask for your pre-approved loan rates. To ensure the ball is still in your court, tell them to provide the best rates for you to choose.
If their rates are attractive than what you were pre-approved for, take the offer. However, ensure the dealer doesn’t alter the car loan terms after you strike a deal. Pre-approvals help you remain steadfast in the car negotiations and help you discern the best car rates to go for.
If you’re shopping for a dream car, it’s prudent to understand the car loan application process to avoid getting a raw deal in the process. Your finance manager can easily dupe you to sign on the dotted line because auto financing is a confusing process. And, as a consumer, you can get the short end of the stick if you’re not keen enough.
Over to You
The best way to save time and money is to get your car loan pre-approved first prior to shopping for a vehicle. The auto-lending arena has grown significantly over time, so you can bet your bottom dollar there are so many players in the game that’ll cater to your needs.
There are numerous benefits of arranging auto financing first including reducing your chances of getting overcharged by a car dealer. This is why pre-approval works so well, and then some.
Because you become aware of your credit problems beforehand, you make informed financial decisions quickly, you come across as an informed buyer, you even strengthen your buying position and simplify negotiations, and lastly, it’s easier for you to beat the car dealer’s rates.
Sometimes, as a car buyer, you can beat the dealer’s rates without getting a pre-approved car loan, but there are plenty of reasons to get auto financing before. You increase your chances of getting better and not being swindled while on the hot seat. Then again it reduces confusion.