Need an Auto Loan? Why Getting Pre-Approved is More Important Than Ever
December 27, 2018 | By Louis Tully
Getting pre-approved for an auto loan before heading to the car lots is sure to become the new norm for minority car buyers.
Thanks to President Trump’s recent decision to remove certain safeguards designed to protect car buyers from discriminatory mark ups, consumers are now being urged to exercise more careful car-buying strategies.
What Does This Mean for Car Buyers?
There’s no way of knowing whether or not this change in consumer protection laws will affect the car buying experience.
Regardless, interest rates will vary based on a buyer’s credit history.
If someone is walking in to purchase their very first car, you can bet they’re going to pay a higher interest rate than somebody with a clean car payment history. Even so, approaching a car dealer with a pre-approved auto loan in-hand puts the consumer in a much better position.
Why Getting Pre-Approved Matters for an Auto Loan
Getting a preapproval for an auto loan will not only help protect you from discriminatory car dealers, but it could also help you buy with more confidence.
Since you know how much you have to spend, what the interest will be, and how you’ll be expected to pay each month, all you’ll really have to do is pick a car, sign on the dotted line, and drive off into the sunset!
But if you choose to walk up to a car lot without having done any research and without a pre-approved auto loan ready to go, you could be setting yourself up for a major car-buying disaster.
Sure, we’d love to think of car dealers as respectful, honest, and full of integrity, but that’s rarely the case in the real world of car-buying. If you’re in the market for a new car, protect yourself now by getting your pre-approved auto loan.
How You Can Get the Lowest Auto Loan Rate
A good way to make sure you’re getting the best rate is to confront the dealer with your pre-approved loan.
Ask them if they can beat the interest rate you’ve already been approved for. This is a really smart move because you can’t go wrong. Either the dealer has to give you a better rate or they risk losing you as a customer.
Either way, you still have your pre-approved loan, which guarantees you’ll walk away with a car. It’s just a matter of picking a dealer who is willing to give you a better deal.
This is yet another reason why getting a pre-approved auto loan is so effective. By carrying a pre-approved auto loan with you to the dealer, you’re not only protecting yourself from shady business practices, but you’re also giving yourself more negotiating power at the same time.
Try These Car Financing Tips
If you’re a first-time car buyer and unsure about your financial situation, don’t fret!
There are several things you can do to ensure you have a pleasant car-buying experience:
- Apply to several lenders: Sometimes, searching for the best rate is a lot like fishing. The more lines you cast, the better shot you have at catching a fish. So, don’t apply to just one or two lenders – apply to several! It’ll increase your chances of getting a bite!
- Submit all your applications within a 2-week period: If you’re going to apply to several lenders at once, do it all at once. Loan applications generally require a hard inquiry on your credit to go through. These hard inquiries can really mess with your credit. But if you submit all your loan requests within 14 days, you can avoid getting hit with multiple hard inquiries on your credit!
- Avoid lengthy loan terms: If you can, avoid longer loan terms. The reasons here should be obvious. Longer terms take longer to pay off. Also, the longer the term, the more interest you end up paying.
- Avoid using a loan for a down payment: Even though you may not think you have enough in savings to cover a down payment, you’d be surprised to find how much a car dealer will accept if it means you signing an auto loan agreement. It doesn’t pay to take out a signature installment loan just to cover a down payment on your car. These loans are better suited for a real financial emergency.
- Search the web for specials and other deals: When it comes to shopping for the best deal, the Internet is your best friend! Online stops like CarsDirect can help you find the best deals on new and used cars with just a few quick clicks!
- Ask a family member for help: In some cases, you may be able to get some financial help from a family member. Hey, it doesn’t hurt to ask, right?
Auto Loan and Title Loan Takeaways
As mentioned, there’s no telling how car dealers will respond to the new repeal, but it’s safe to say that car buyers will begin to protect themselves by doing more research at home first, even if that means arming themselves with a pre-approved auto loan before even showing up at the car dealership.
Hopefully, this guide has helped provide you with the knowledge you need to use smarter car-buying strategies and protect yourself from a bad auto loan.
Good luck and happy hunting, wherever your car-buying journey brings you!