Before stepping foot on the dealership lot, it’s crucial to get pre-approved for an auto loan. Buying a car requires you to make sound decisions, and a pre-approved car loan eases the financial decision-making. Typically, pre-approval will involve a lender who will look at your credit, evaluate your financial situations, and issue you with a general auto loan.
Here are some reasons you should get a pre-approved auto loan:
Saves you money on interest rates
Shopping around is the ideal way of ensuring that you save money and for an auto loan. By getting different lender quotes, you can choose the best loan terms and interest rates. Also, getting pre-approved allows you to know the market’s auto loan interest rates and gauge if the dealer is offering a better deal. This helps you avoid high interest rates that the dealerships often mark up on your loan when they realize you haven’t been pre-approved.
Work with a realistic budget
Pre-approval means that you know how much you can actually afford by evaluating the specific loan amount and the interest rates. Hence, you can set a realistic budget without the pressure of a salesperson bearing you down. However, while setting the budget, it’s vital to understand the additional current car taxes, fees, insurance, and other costs of owning a car such as current down payments.
Better dealership experience
When you get pre-approved for an auto loan, the dealers treat you more like a cash customer- someone who can walk away from the negotiations at any time. It allows you to emphasize on negotiating the car price rather than your monthly payment and financial logistics. You can also hone in on the features you like about a particular car.
Keep your options open
An auto pre-approved loan is not anchored in stone- there’s no compulsion to use a financier. You can bring the pre-approved coupon or check and ask the dealerships if they can beat your interest rates. Typically, they can access cheaper loans from captive lenders- banks established by car companies to make auto loans only. Thus, with a pre-approved loan, you have a broader platform to choose the best financing option.
Get more leverage
While closing the deal and signing papers, the dealership often comes up with add-ons, upgrades, and extended warranty offers that might not interest you. A pre-approved auto loan is an excellent way to deflect such offers since you have a fixed price that you do not want to stray from.
The car buying process can be arduous. So, get preapproved for an auto loan before your car shopping experience. It will allow you to focus your attention on what you know will work for you.