You finally found your dream car – the perfect model, color and options. It has everything you wanted, and the budget almost works. But the dealership’s financing offer does not fit what you hoped. What if another lender could offer you the auto loan that matches how great this car is? Getting pre-approved financing is the key secret to turning this beauty into the best car deal ever by getting you the best rate.
Understand Dealership Financing Realities
Many people assume they need to finance where they buy when purchasing from a car dealership. This leads to accepting higher interest rates and poorer loan terms. Dealers make money by marking up financing, often called the ‘finance reserve’. This means they offer customers higher rates than the actual lender charges and pocket the difference. And this extra percentage goes straight into their pockets, not toward your new ride.
On a $30,000 loan over 5 years, just a 2% markup could mean paying $1,200 more in hidden fees. Learning how dealership financing works reveals why pre-approval is so powerful. Now you can demand the best car price without over-paying on the loan.
Getting Pre-Approved Takes the Power Back
When you already have financing lined up before entering negotiations, it shifts the advantage in your favor. No longer does the salesperson push you into agreeing to dealer financing after you’ve fallen in love with a car. Now, if they won’t drop to the best car price possible, you can walk away rather than take a higher interest rate.
Banks and credit unions, like US Eagle FCU, offer pre-approvals, and they do not make money by marking up rates. Comparing an auto loan from them against dealership financing clearly shows which is the smarter way to minimize total costs.
Pre-Approval Lightning Round
Getting pre-approved might sound complicated, but here are the key steps broken down:
- Check your credit score and report first so you know where you stand. Sites like annualcreditreport.com give free yearly reports. Pay services provide monitoring to check more often.
- Comparison shop interest rates between banks and credit unions. See who offers the best terms for your credit score.
- Complete application with income proof, ID, and info on the car you want to buy if possible.
- You’ll get a pre-approval letter with rate, time limit and terms to shop with.
Now this official financing letter gives you serious clout and confidence to negotiate the purchase without worrying about dealer financing tricks.
Negotiate from a Position of Strength
Pre-approval financing in hand, you stroll onto the car lot ready to deal. Other preparation, like pricing research, allows you to zero in on a fair overall offer.
When inevitable dealer financing comes up, just smile and say thanks, but you have your own financing already. Watch that sales person suddenly get serious about dropping the car’s price. No angle to make extra profit means dropping to honest pricing.
Other negotiation tips like focusing on total out the door price rather than monthly costs work even better with your own financing set. And you decide what add-ons or extras make sense for you, not what earns the dealer more.
Conclusion
The perfect car with perfect financing awaits to turn automobile ownership into an actual dream instead of a financial nightmare. Go prepared into the dealer’s den, stick to your guns, and escape with a great ride at a fair price. Finding your dream car can come true when you secure favorable financing from the start before encountering dealership tricks. Then you steer straight into satisfaction thanks to the right rate on the right wheels.