There are several strategies to buying a car, but the most common process is buying and financing directly with the dealer. This purchase option isn’t necessarily a bad choice for some buyers. However, you might be overlooking a better deal that’s offered by a lender outside of the dealership. Learn how a preapproved loan can help you at the car dealership. Specific steps will help you turn that offer letter into an affordable, vehicle investment.
Clean Up Your Credit History
To receive a car loan preapproval letter, you’ll need to clean up your credit history. Your credit is a reflection of your responsibility level in the world. Any mistakes or omissions on the report may create a financial problem for you. Percentage rates are based off of these histories. Before you speak to a lender, do your homework to correct the credit report. It’s possible to improve your credit score by several points if the report is as clean as possible.
According to US Bank, lenders have rapid processes where you can be approved in little time. Although gaining access to a preapproved loan is desirable, don’t jump at the first chance. Ideally, apply for about three or four different loans with various lenders. Each business will qualify you on slightly different factors. It’s possible to have three or four different APRs for the same loan amount, depending on the lender’s trust in you. Compare these offers, and hold onto them until you’ve found a car.
Head to the Dealer
With a preapproval letter in your hand, you know exactly what you can afford with a concrete APR number. Visit several dealers to look at their stock. Discuss the options and prices on the cars. Don’t talk about your preapproval letters yet. You want to bring the car’s price down with basic negotiation before asking about financing.
Negotiate With the Finance Department
There’s a lot to discuss in the finance department, states Bank Rate. You’ll be asked about add-ons and other features that increase the vehicle’s price. Decline these options, and ask about the dealer’s financing offer. These professionals have their own bank for financing purposes. They don’t know what kind of offer you have already. In most cases, they’ll try to negotiate a reasonable APR. If their APR is better than your preapprovals, go with the dealer’s plan. When you have a better offer, counter the dealer’s plan with your APR rate. They may just match it to make the sale.
Car shopping can take some time, especially if you’re limited to weekend browsing. Be aware that most preapproval offers expire after 30 days. If you miss the 30-day mark, you’ll need to apply for the loan again. Ideally, decide on your purchase within the 30-day period so that you don’t have to run your credit through the system once again. You want to reduce the number of times that your credit score is accessed so that the number remains as high as possible.