Top 3 Reasons Why You Should Pre-qualify For an Auto Loan.
Many consumers spend weeks and months shopping for a car, and wait until they walk into the dealership to figure out how they will finance the car. There are three reasons why you should pre-qualify for an auto loan.
Knowing your baselines means you understand your worst case scenario. By pre-qualifying you now have the power to negotiate your auto financing terms? The dealer can either meet or beat your current deal. In many cases the dealer makes as much profit on the auto loan as he/she does on the sale of the new car. In most cases part of something is better than all of nothing. If you can knock off a point or two from your (pre-approved) interest rate you can save about $25 per month on that alone (depending on your loan amount and loan term). You worst case scenario when you walk into the dealership, you have a stronger understanding on what you can afford and you have improved your negotiation position.
Let’s dig a little deeper into improving your negotiation power. I would recommend holding your cards close to the vest. Hold on to your pre-qualification documents until you get into the finance office and meet with the finance person. He/or she will present you with financing options. Share with them that you have alternative financing and don’t mind working with him as long as he/she is willing to sweeten the deal. Now don’t look for the dealer to give you a deal your credit score didn’t earn you. You should feel good about beating the terms of your pre-qualification.
If the dealer cannot better your deal, go with what you know. You have a deal in your hand and if it’s proven to be a good deal, go for it. Additionally, this may also be a good situation for anyone that just wants to avoid the conflict of extended negotiations. If you use all of your negotiation energy on the price of the car, then you can use your prequalification for peace of mind.
The goal of this article is ultimately to help you save money. By prequalifying for auto financing you can do just that. First you secure real loan terms to build a baseline. Next you figure out your true budget, so you don’t overspend. Finally, you are able to negotiate with the dealer and put yourself in a position to get a lower rate on your loan. The best time to save money is always right now.