Why Pre-Approved Car Loans Make Sense

Why Pre-Approved Car Loans Make Sense

Buying a new car can be an arduous experience. You’ll need to conduct research to figure out which cars are best for you. You’ll test drive models to see which one of those feels most right. And then, there’s the part people tend to dread most of all — negotiating the deal.

In addition to striving to get the best price, you should be trying to get the best financing package possible. This means the shortest term achievable with the lowest interest rate available, at a monthly payment you can comfortably afford.

This is why pre-approved car loans make sense.

What Is a Pre-Approved Loan?

As the categorization indicates, this is financing for which you’ll seek authorization prior to making a purchase — or even visiting a dealership for that matter. Doing so is a smart play for a number of reasons. First and foremost, it will help you determine the appropriate price range within which to shop.

If your financial situation will support a $30,000 loan and you’re looking at cars in the $50,000 range you’ll be setting yourself up for disappointment. Further, you might overlook some real gems in your price range because you’re focused on impossibly expensive cars.

You’ll Know Exactly What You’re Paying

Another key advantage of the pre-approved car loan is you can know exactly what your monthly payment will be — in advance of the purchase. This way, you can ensure the car will fit into your budget, rather than trying to stretch your finances to accommodate a purchase you shouldn’t have made. You’ll also know your exact interest rate and the length of the loan.

You’ll Save Money

With a pre-approved loan, you can also focus your efforts on getting the best price for the car. Dealers will usually try to focus your attention on the monthly payment in an effort to maximize the amount you pay for the car. However, when you already have a loan you can afford, you can focus on the total price of the car instead.

Let’s say you’re looking at a total price of $30,000. Running the numbers through a car loan calculator, you’ll see your payment would be approximately $510 over 60 months at five percent interest with a $3000 down payment. Now, let’s say the dealer is in a position to sell you that same car for $25,000 rather than $30,000. Your payment would be $415 — with all of the same terms.

Here’s the thing though, if you tell a dealer you can afford $510 a month, they’ll get you there at $30,000. Meanwhile, you could’ve had the car for $25,000 and $95 less monthly if you’d focused your negotiations on the price rather than payment.

It’s Possible to Get Even Better Loan Terms

You can use your pre-approved loan as a bargaining chip to get a lower interest rate from the dealership. You’ll know exactly what you’re qualified to contract for, so you’re in a better position to respond when the dealer starts throwing interest rates and loan terms at you.

When you know what you really deserve, they can’t push you into accepting an unfavorable deal. If they want your business, they’ll have to beat the arrangement you already have in hand.

These are but three of the reasons pre-approved car loans make sense. Of course, regardless of how many other reasons you find, they will all amount to the exact same thing when you get right down to it.

You’ll get more car for less money, which is an idea everybody loves.