If you are looking for the guide about "Should I get an auto loan before going to the dealership" then you must read this article.
It is no secret that agents raise interest rates to achieve higher profits. In today's auto loan market, it is best to get financing before you go to the dealership.
Working on financing outside of a dealership gives you time to explore your options and see what rates you qualify for. This puts you in a better position to negotiate and also ensures that you don't get dealer financing when you could get a better deal elsewhere.
Why is it better to get financing before going to the dealership?
When you apply for a car loan before visiting a dealer, you have a better chance of getting the best loan terms, including the most competitive rates.
You may qualify for more favorable terms
The agent markets your loan to partner lenders or works with a restricted finance company. The dealership may mark up its rate a few percentage points above the average car loan rate for your credit range. This is one of the main reasons why getting outside financing before visiting the dealer can save you money. Basically, you get the wholesale price from the lender instead of having to pay the broker - which is an additional fee for the agent.
Start with the bank or credit union that you already have an account with. If you have an open account in good standing, he may give you a discount on the relationship or better conditions.
You can avoid surprises
Your rates depend on your credit score and general financial health. When you pre-qualify—and then apply for pre-approval—for an auto loan, you can see what rates you qualify for. If you have poor credit, you may also want to take some time to improve your score before taking out a loan to ensure that you get competitive terms.
You can review your monthly payment
You can calculate your monthly payment based on the pre-approved amount and rates. This will help you to determine the optimal monthly payment for you based on various loan conditions.
Many lenders offer terms between 24 and 72 months - although 84 or even 96 month terms are unheard of. However, a longer loan term may reduce your monthly payment, but you will pay more interest over the life of the loan.
This strengthens your negotiating position
A pre-approval offer will not only help you find a car that fits your budget, but it will also boost your negotiating position. The agency's financial office can beat your pre-approval offer to secure your business. In addition, he can help you negotiate the price of the car or other terms of your loan.
How to arrange car pre-financing
To get the best car loan rate, you need to determine your budget and take the time to research both your car options and the right lender for your money.
Set your budget. Before applying for any loan, including a car loan, you should always check your balance and calculate the monthly payment that you can afford.
Pre-qualify with multiple lenders. Pre-qualifying for a loan allows you to review your rate. Many lenders offer pre-qualification without a rigorous credit check, making it easier to compare rates.
Search your vehicle. Sources like Kelly Blue Book and Edmonds allow you to check average costs in your area. They can also help estimate maintenance, fuel and car insurance costs to give you a better idea of your budget.
Lock your price. Once you've compared lenders and know what type of car you want, lock in your price by applying for a pre-approval. This will put you in a stronger negotiating position in the agency.
Check merchant offers. While agents don't usually offer the best rates, you may be able to negotiate a better rate. With pre-approved offers, see if agency financing is higher than your rate or has better terms.
What to do if you can't get financing in advance
Oftentimes, agency financing is one of the most accessible options if you have a bad credit score. Since dealers work with a variety of lenders, they may be able to find financing for you even if you don't qualify with traditional lenders.
Online merchants like Carvana and Vroom are also more open to borrowers who don't meet stricter eligibility criteria. In general, choosing a used car over a new one means an affordable monthly payment and potentially a lower interest rate, even if you don't have the best credit.
If you don't need a car in the near future, it might be best to wait. If you have bad credit, the interest rate can be very high. And while you can always refinance your auto loan at a later date, taking the time to improve your credit now can mean scoring a lower rate right away.
Bottom Line
Arranging your auto loan before going to the dealership is the right approach for most people. Not only can you opt for dealership financing, but you may be able to take the stress out of car buying.
If you want the best deal, check auto loan rates and go to the dealership with a pre-approved offer.
