5 Benefits of Getting an Auto Loan Pre-Approval

You might not think there are many similarities between buying a car and buying a house. However, these two purchases do have some things in common.

One of the most important is the pre-approval process. Buying a car isn’t something to be done lightly. It can be stressful. You may not know how much you can afford, and you might be nervous about negotiating a loan. One way to mitigate the nerves and shop with confidence is to get an auto loan pre-approval.

Auto loan pre-approvals are similar to mortgage pre-approvals. They allow you to go into the car-buying process armed with a concrete idea of what you can afford. With that in mind, here are five benefits of getting an auto loan pre-approval.

#1: You Can Be Sure to Get the Best Interest Rate

Perhaps the biggest benefit of getting an auto loan pre-approval is you can buy a car knowing the best interest rate you can qualify for. If you take the time to get quotes from several lenders, you’ll have a solid foundation from which to negotiate.

Regardless of which dealership you go to, you’ll be offered the chance to apply for in-house financing. If you do that without getting a pre-approval first, you won’t have any way of knowing how the interest rate offered by the dealer compares to what you could get elsewhere.

#2: You’ll Know What You Can Afford to Spend

The second benefit of getting an auto loan pre-approval is you will know, before you look at a single car, how much you can afford to spend. That’s a big plus because it means you can go into the dealership with a clear picture of which cars are in your price range and which aren’t.

The issue with not knowing your limits is you may fall in love with a car you can’t afford. Then, you might find yourself on the receiving end of some intense sales tactics from the dealer. With a pre-approval in your pocket, you can go in knowing what you can spend and work from there.

#3: You’ll Be Negotiating from a Position of Strength

When a potential buyer walks into a car dealership without a pre-approval, the salespeople know they can use every tool in their arsenal to sell a car and loan combo to the buyer. The buyer may not know what they can afford – and may not feel they can get a loan from another lender.

On the other hand, your pre-approval means you go into your negotiation as a cash buyer. If a salesperson tries to strong-arm you, you can simply tell them, “I’m a cash buyer.” They’ll know you can walk into any dealership in town and buy a car. You don’t need them – and they do need you. That gives you the upper hand.

#4: You Can Avoid Hidden Costs

One of the most frustrating things that can happen at a dealership is they’ll offer you a loan without disclosing the hidden fees they add to your quote. They may be added to the lender’s interest rate and presented to you without explanation.

If you go in with an auto loan pre-approval, you might still get offered a dealership loan with hidden fees attached. But, the difference is you’ll know what you already have and will be armed to ask the questions you need to ask. Without a pre-approval, you won’t be able to compare rates, ask about the differences and make an informed decision.

#5: You’ll Get Your Car More Quickly

The final thing getting an auto loan pre-approval can do for you is it can expedite the process of buying a car. If you go through the pre-approval process first before you set foot in a dealership, you can be in and out with a new car in less time than it would take otherwise.

Part of the reason is a pre-approval allows you to eliminate a lot of the back and forth that goes on when you talk to a salesperson. Instead of worrying about what monthly payment you can afford, you can focus exclusively on negotiating a price for the car you want. In other words, an auto loan pre-approval offers you the chance for a streamlined purchase that will save you time and eliminate many of the aggravations associated with buying a new car.

Buying a new car is exciting, but it can also be a stressful process. When you take the time to secure an auto loan pre-approval before you go shopping for a car, you guarantee that you’ll have a smooth experience and get the car that's right for you – and for your budget.

To learn more about Addition Financial’s auto loans and pre-approval process, please click here now.