ALT-1 Car Financing
You should secure your financing before car shopping so you know how much car you can afford and at what terms. A car salesman makes his money both on the car and on the financing side of the car. When you walk into a dealership knowing you can secure a loan for specific terms, you end up getting a better deal not just on the loan but the car as well. A salesman will see that you are prepared and you mean business. You do some research on what type of car you want, why would you not want to do some research on what type of loan you want as well?
Sure the dealership can take care of all the financing, credit and bank information. But you don't think they do that just to get you in the car of your dreams, do you? You can be sure the dealer is making money somehow on you financing your vehicle through their lenders. And that is okay, as long as you can get the same terms your bank or credit union offered you as well.
Once you know you are approved for a certain amount at a specific term, you will know what your payments will be and how much you can afford. Knowing what your limit is can be very important since dealers often say they can get you the monthly payment you want, but you may not realize you are signing a loan for 7 or even 8 years now. Also, knowing the amount you can afford will help you find the right car. Why look at a brand new Jeep for $35,000, fall in love with it only to realize you can't afford it. This way you will know what the most you can spend is.
If you have financing in place there will be no hassles, no guesswork and no salesman trying to get you a "better" deal on the rate that is not a better deal for you. By securing the financing upfront, the dealerships need to work harder to convince you to go through them and to convince you to purchase other add on items.
It is a good negotiating move for you. Just because you have the pre-approval, you don't have to go with that lender, the dealership may be able to get you a better term and rate. When securing the financing, make sure you are able to add on for things like gap insurance, a warranty and other items as needed.
Pre-approval will not only save you money and hassle but it can be a huge time-saver as well. You will know walking into the dealership that you are able to get a vehicle and not have to worry about waiting for an approval from the bank. Or being turned-down or conditioned by a bank. You will know how much you can borrow, what your payments are and at what rate before you pick out the car of your dreams.
