Silly as it may sound, if you are considering financing a new or used automobile it is actually wise to secure a car loan before you actually look for your car. While the financial aspect of purchasing any auto is certainly the least enjoyable, there are a number of benefits to taking care of it before you have chosen the auto of your dreams and have begun negotiations at a dealership.
Know what you can afford – By working with a lender ahead of time, you can have a better understanding of the amount that you can finance. Some lenders will even offer car payment estimate tools to help determine what your monthly payment will be if you finance different cars at different prices.
Walking into a dealership armed with the amount you are approved to finance can help you to pinpoint the types and models of cars that you will qualify for, which can also make your car buying process much easier.
Become a cash buyer – Because the dealership doesn’t partake in the financing process, buyers who walk in with a pre-approved loan are treated most similarly to cash buyers. Salesmen know that you have come with financing already in-hand and for that reason are more inclined to give you better deals and more incentives to make the deal.
When you finance an auto with a dealer, they commonly make trade-offs such as giving you 0% financing, but doing so only by taking away a rebate offer or a buying incentive on your chosen auto. These trade-offs may initially seem like a great deal, until you realize that you could have paid less for your new or used car.
Lower interest rates – The ability to shop around prior to purchasing an auto for a car loan that best suits your needs, means that you are more likely to get a lower interest rate. Oftentimes lenders who are not affiliated with dealerships offer rates as low as 1.99%, and with an interest rate that low you can save hundreds over the life of your loan.
Keep in mind that dealers don’t necessarily work to get you the best interest rates, because the more you pay for your car, the higher the profits are for the dealer and the sales professional.
These are three big reasons which certainly warrant the time and effort that it takes to identify the best auto lender for your financial needs prior to walking into any dealership. Not to mention the fact that pre-approval for an auto loan saves you time at the dealership and helps to eliminate some of the financial haggling that salesmen like to do.
When you get to the buying process, all you have to do is focus on getting the car, truck or SUV that best fits your lifestyle and your wallet. Financing an auto is a serious purchase that buyers have to live with for the life of the loan, so getting the most out of your money should always be a priority.