Getting pre-approved for an auto loan gives you a lot of negotiating power. Plus, it allows you to keep your financing options open. It also gives you insights into some very important information.
You learn how much you can actually afford. This way, you don’t go after a car that can ruin your finances. Or, you may learn that you can spend with confidence.
You also find out how much the monthly payments are at different purchase prices. Not letting the salespeople do this allows you to save a lot of money. Salespeople often manipulate the numbers to make them seem more appealing while actually being more expensive for you.
You understand the interest rates that are available in the market. It helps if you have one or two loan offers in hand before you visit the dealership.
Cash Buyer
Pre-approval for a loan means you will be buying a vehicle based on its total price and not the monthly payment. Dealers try to get you to focus on monthly payments as these are easy to manipulate. Remember, you need to pay the right price for the car. And you need to pay as little interest as possible. How much you’ll spend on the vehicle will also be much more transparent when you negotiate on the total price instead of the monthly payment. And you can buy the car when you’re ready. Others who don’t have pre-approval may learn about financing hurdles later in their shopping stage.
Price Negotiations
When you’re pre-approved for an auto loan, you can negotiate with the dealer on the only number that matters – the total price of the car. The dealer will have nothing to do with your monthly payments and will not be able to manipulate any numbers. You and the dealer just have to work out what price is agreeable to both parties. You will also get to focus on the things that matter.
A Better Offer
The dealer may try and beat your pre-approved loan offer. They may actually have a financing offer and incentives from the manufacturer that make much better sense than your pre-approved loan. So, consider the details carefully.
