What’s the first thing you do when you need a new car? Look for options online? Check out the different makes and models? Or head straight to the dealership? Whichever it is, if you have the intention of taking out a car loan, you should get preapproval before doing any of this. Why? Because without a preapproved car loan, you have little negotiating power-and that means you may not strike the best deal on your loan.
Now imagine this- You get preapproved for a car loan, walk into the dealership with the best possible deal, expedite the car-buying process, and get into your new ride in a jiffy. Yes, this is possible! And that’s why a preapproved car loan makes a lot of sense.
4 Reasons Why a Preapproved Car Loan is good for you
- Tells you how much you can afford. A pre-approved loan helps you find out how much exactly a lender is willing to loan you. This enables you to determine the vehicle price range that you should be considering. Moreover, it also helps you set a realistic budget for your car purchase.
- Helps you plan your monthly budget. Once you know the car loan amount you are eligible for, you can decide which car best fits your needs and budget. Moreover, you will also get an accurate picture of your monthly commitment. This helps you control and plan your finances better.
- Gives you better-negotiating power. When you have a lender-approved check in hand, you become a cash buyer. This puts you in a better position to negotiate the price with the dealer. Similarly, you can also deflect unwanted expenses such as add-ons and extended warranties. Some dealers have access to cheaper financing options. You can even check if the dealer is offering you a better deal than your preapproved loan.
- Allows you to check out multiple dealers. With a preapproved car loan, you are not tied down to one dealer. Since you’re not dependent on one dealer for financing, you’re free to explore other dealers and their offers.
Getting a pre-approved car loan comes with all these benefits. But remember, this is not the same as being prequalified for a loan. Prequalification only means that the lender is likely to approve your loan at a given rate. A preapproval, on the other hand, is when the lender reviews your credit and all other information and offers you a definite loan amount for a specific rate of interest. So a preapproved car loan certainly puts you in a better buying position. It gives you stronger negotiating power and prevents you from being fooled into paying a higher interest rate than you deserve.