In today’s market, it’s wise to arrange financing before visiting a dealer. This gives you time to explore your financing options and see what rates you qualify for before stepping into the dealership. It also ensures you don’t settle for a car you can’t afford.
Benefits of upfront financing
Arranging financing before visiting the dealer gives you a better chance of getting the best deal.
Before you go to a dealership, your credit score can help you get an idea of the interest rates, repayment terms, and monthly payments you qualify for. If you already know what rates you qualify for, you can walk into the dealership knowing you’re getting the best deal.
Lower stress level
Meeting with a lender — virtually or in person — before visiting a dealership can reduce the stress you feel when the dealership offers you a loan. If you’re able to do some research and find the best loan terms for your situation, you’ll be more willing to negotiate and make an informed decision rather than being pushed to do something on the spot.
You are well prepared
Arranging financing before visiting a dealer can make it that much easier to make a purchase that you are happy with. With financing, you’ll have a better idea of which vehicle makes the most financial sense, and buy in the full cost rather than the monthly payment.
How to arrange car financing in advance
To ensure you get the best possible rates and terms, you should follow these steps.
1. Look around
Start shopping. You can do this in two ways. Either go online to check rates that don’t require you to enter a lot of personal information, or call several lenders and ask for quotes. The more quotes you request, the more likely you are to get a competitive price. Try to get offers from at least three lenders.
2. Research the dealers
Dealers can present their financing options transparently. So once you have a deal in hand, you can check the websites of any retailers you are considering to see what type of rates they are offering. If the dealership offers a low interest rate, you can take it back to the lender you are working with to see if they can beat that rate.
3. Get pre-approved
The next step in arranging financing is to get full pre-approval from the lender that offers the best interest rate and term for your needs. This allows you to walk into the dealership with an offer in hand – giving you even more bargaining power.
4. Negotiate for the best deal
After you’ve been approved for financing, it’s time to shop around and negotiate the best deal. You can easily do this by going to several dealers with your pre-approval documents in hand. Use the fact that you already have financing to better negotiate the car’s price and bypass common high pressure selling tactics.
What to do if pre-financing is not possible?
If you can’t get credit before visiting a dealer, that doesn’t mean you shouldn’t go. You can ask to speak to a seller for assistance with financing.
If you still can’t get dealership financing, it might be time to take a step back.
Instead of taking out a car loan designed for customers with bad credit or a buy here, pay here lot, it may be better to work on improving your credit score and reducing your debt. There are many ways to improve your credit score, but they take time. Start by pulling out your credit report and checking it for possible errors. From there, you need to work on paying off existing debt and lowering your overall debt-to-income ratio.
If you need a car sooner rather than later, you may need to look for low-credit options or a cheaper vehicle. Buying a certified used car can be a way to get a good deal on a well-maintained car.
The final result
There are many advantages to arranging financing in advance, including better terms, a lower level of stress and the chance to get a great deal that you probably wouldn’t get if you went direct to the dealer. To make sure you’re getting the best possible rates and terms, do your research, get pre-approved, and research the dealership.