It's a bit of a joke that buying a new car is as stressful as getting a colon screening, but there may be a bit of truth to this. Dealerships are intimidating, you're unsure about the whole buying process and you wonder if you are getting a good deal on the price and the interest rate. One way to erase a lot of stress and worry from car buying is to get pre-approved for an auto loan first. Here are 5 reasons why you should have a loan approval first before you hit the dealerships.
You're Given An Opportunity To Improve Your Credit
Part of the pre-approval process includes running your credit to determine your eligibility and interest rate. If there's any surprises, now is your chance to catch them before you find the car of your dreams. If your credit turns out to be less than perfect, you have an opportunity now to repair it before you buy your car. A better credit score means you can score an auto loan with great terms and interest.
You Have A Sense Of Freedom And Confidence
When you walk into a dealership with a loan pre-approval, you get an incredible sense of freedom. Freedom to focus on details about the car you're interested in rather than what loan terms the dealer decides you qualify for. Instead of haggling over interest rates and monthly payment amounts, your attention is on important things like climate control, upgraded rims, entertainment options, and leather versus cloth.
You Have The Power
Normally, the dealership has all the power or control because they usually handle every single aspect of purchasing a car. Trade-ins, down payment assistance, financing and inventory are all handled under one roof. When you are already qualified for your auto loan, you are in control of the transaction. Your salesman will respect the fact you are already approved and will work to earn your business, knowing you are free to go to any dealership to buy. They may throw in added incentives like vehicle upgrades, promotional offers or cash back.
The Dealer May Try To Beat Your Rate
Of course, just because you already have an approval when you walk in doesn't mean the dealer is going to leave it alone. Traditionally, dealerships make money on auto loans as well as on the sale of a car. They may offer you a loan with a better interest rate and terms than the one you're armed with when you walked through their door. Points for you!
Less Access To Your Personal Information
When you receive approval from your bank, you are assured that only your bank has access to all your personal information. This lessens the opportunity for that information to fall into the wrong hands, increasing the likelihood of identity theft. In contrast, dealerships obtain funding for you via third-party lenders, often shopping your application through several sources of lending to obtain an auto loan for you. Your loan paperwork can travel through many hands by the end of the day. You really don't know who has your address, social security number, birth date and driver's license number.
Given the number of advantages out there just by getting qualified for an auto loan of your own, it's worth the effort to visit your bank and start the process. When you are ready to go car shopping, you will have increased confidence, freedom and power during negotiations. The dealership will work to beat your current loan interest rate and terms. You may even have an improved credit score and less likelihood that your identity could be stolen.