Buying a car can be a grueling process. It usually goes something like this: You go to a dealership and find an automobile that suits your tastes and/or needs. You discuss it with the salesperson, take it for a test drive, and decide whether to pursue it or keep looking. If you’re still interested, you discuss the price and apply for financing. Then the salesperson goes back and forth with the sales manager until a workable price and financing plan is reached.
But sometimes it’s not that simple. Buyers often choose a vehicle that is beyond their price range, and the dealer will not finance it. Or worse, the buyer may be turned down for credit completely. But much of this hassle can be avoided by getting a preapproved car loan through a bank.
Getting preapproved for a car loan is a fairly simple process. The buyer simply goes to the bank before setting foot on a car lot and requests preapproval. The loan officer takes an application and runs the buyer’s credit report, and informs him how much money he qualifies to borrow. The buyer may then start looking at cars, and when he finds one in his price range, the bank sets up the loan.
Benefits of Preapproved Car Loans
Getting a preapproved car loan has some definite advantages. These include:
* It shows dealers that you’re serious about buying. When they know you’re definitely planning on purchasing a vehicle, they’re more likely to try to offer you a good deal to keep you from going elsewhere.
* Having a preapproved loan from the bank eliminates the need to haggle over dealer financing. Rates for dealer financing are often much higher than those offered by a bank, and rebates or discounts may be tied to the interest rate. When you already have approval from the bank, you won’t have to make concessions in these areas.
* You know your price range before you start shopping. This can help you avoid pursuing cars you can’t afford. It may also give the dealer more incentive to offer you the best deal possible.
* It’s possible that the dealer might try to beat the rate on your preapproved bank loan. Dealers receive commissions and other incentives from the banks that do their in-house financing, so they prefer for buyers to finance through them. If they can offer you a lower interest rate than your preapproved bank loan, they will usually do so.
Getting preapproved for a car loan doesn’t put you under any obligation. It simply means that the bank has agreed to finance up to a certain amount for you. There are usually certain requirements regarding the age and condition of the car, but you can generally choose any car you want and know that financing will not be a problem.