If you’re thinking about visiting a car dealership and purchasing a new or pre-owned vehicle, you may be wondering how you can get the best deal on a car, and streamline the purchase process. Though there are plenty of tips and pieces of car buying advice we could give you, we’ll focus on loan pre-approval in this article. Does it really help? Is it important? How does it work? Get the answers to all of these questions (and more) now.
What Is Loan Pre-Approval?
Well, it’s exactly what it sounds like! Unless you’re lucky enough to have plenty of cash saved up, or you’re purchasing an older, high-mileage car, you’re probably going to have to take out a loan to buy your vehicle.
Loan pre-approval just means that, before going to a dealer, you’ve visited your bank or credit union, and gotten approved for a car loan – usually up to a certain dollar value.
Basically, as long as you make a purchase of a car within those terms within 10-60 days (the length your pre-approval is good for depends on the lender) you’re going to get financing from your bank at a guaranteed rate.
To get pre-approval, you just have to go to a bank or call them. They’ll look at your finances and credit score, and determine whether you’re eligible for pre-approval – and how much money you can get.
Does Loan Approval Really Help At The Dealership?
In a word, yes! But to break things down further, let’s look at a few benefits of having loan pre-approval when shopping for a vehicle at any Surrey car dealership.
- Your financing won’t fall through – This is a huge benefit. Buying a car, driving away, and then getting a phone call and being told that your financing application was denied or must be adjusted is a nightmare – and difficult to deal with. You’ll never have to worry about this if you’re pre-approved.
- It will be clear that you’re a serious buyer– A loan pre-approval means you’re going to be able to drive away from the dealership in a car. You’re guaranteed to get financing, so the dealer may be more willing to work with you when it comes to pricing and incentives.
- The process will be simple and fast– Filling out a loan application at the dealership can be time-consuming and confusing. But you don’t have to worry about this if you’re already pre-approved through your bank.
- The dealer may offer to beat your rate – Car companies make extra money by financing cars themselves. Toyota, for example, has a financing service called Toyota Motor Credit. Usually, if the dealership can get you to finance with the auto company’s finance arm, they’ll get an extra bonus on the sale.
What this means for you is that, if you have a pre-approved loan – such as a 5-year, $30,000 loan for a 4.5% APR (Annual Percentage Rate), the dealership may offer you even better terms if you finance through them.
Using the above loan as an example, if the dealer offers to undercut your pre-approved $30,000 loan to a to a 5-year, 4% APR loan if you finance with them, you’ll save over $400 over the life of the loan. Sure, that’s not exactly a huge deal – but every penny you can save counts!
For these reasons – and quite a few more – pre-approval is nice to have when shopping at a car dealership. Even if your pre-approval doesn’t get you a better deal or discount, it gives you peace of mind and confidence when browsing new and used vehicles.
Get Pre-Approved – And Find Your Next Car Without The Hassle
If you’re thinking about shopping for a car, we recommend getting in touch with some local banks and credit unions, and seeing if you can get pre-approved for a loan. Doing so will make things easier – as outlined above – and can help you save both time and money.