In today’s market, it’s smart to arrange financing before visiting a dealership. Working out financing ahead of going to the dealership gives you time to explore your options and see what rates you qualify for before you talk to a salesperson. It also ensures that you don’t commit to a car you can’t afford or take dealer financing when you could get a better deal elsewhere.
Benefits of arranging financing in advance
When you arrange financing in advance of visiting the dealership you have a better chance of getting the best deal.
Before you walk into a dealership you can get an idea of the interest rates, loan terms and monthly payments you will qualify for based on your credit score. When you already know what rates you qualify for, you can go into the dealership with the assurance that you are getting the best deal.
Lower stress levels
Sitting down with a lender — virtually or in person — before visiting a dealership can reduce the stress you feel when the dealer presents you with financing deals. If you are able to do some research and find the best loan terms for your situation, you will be more prepared to negotiate and make an informed choice, rather than being pressured into something on the spot.
You’re well prepared
Arranging financing before visiting a dealership can make it much easier to make a purchase that you are happy with. With financing in place, you will have a better idea of which vehicle makes the most financial sense and will be shopping based on the overall cost instead of the monthly payment.
How to arrange auto financing in advance
To make sure you are getting the best rates and terms possible, you should follow these steps.
1. Shop around
Start by shopping around. You can do this in one of two ways. Either go online to check rates where you don’t have 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 rate. Try to get quotes from a minimum of three lenders.
2. Research the dealerships
Dealerships can be transparent about their financing options, so once you have a quote in hand, you can check at the websites of any dealerships you are considering to see what type of rates are on offer. If the dealership offers a low rate, you can take it back to the lender you are working with to see if they can beat that rate.
3. Get preapproved
The next step in arranging financing is to get fully preapproved with the lender offering the best rate and term for your needs. This will allow you to walk into the dealership with an offer in hand — giving you even more power when it comes to negotiating.
4. Negotiate for the best deal
After you have been approved for financing, it is time to shop around and negotiate for the best deal. You can do this easily by walking into multiple dealerships with your preapproval documents in hand.
Make sure that you tell the salesperson you’re going to consider dealership financing. Keep your preapproval close to the chest until you’re ready to actually buy. You can then use the fact that you already have financing to work around common high-pressure sales tactics.
What to do if you can’t get financed in advance
If you can’t get approved for a loan before visiting a dealership, that doesn’t mean you shouldn’t go. You can ask to speak with a salesperson for assistance in getting financed. If you are still unable to get financed through the dealership, it may be time to step back.
Rather than taking out an auto loan designed for customers with bad credit or visiting a “buy here, pay here” lot, it may be better to work on improving your credit and lowering your debt. There are many ways to go about improving your credit, but they take time. Start by pulling your credit report and reviewing it for potential errors. From there, you will need to work on paying down existing debts and lowering your overall debt-to-income ratio.
If you need a car sooner rather than later, you may need to look into low-credit options or a less expensive vehicle. Shopping certified pre-owned may be one way to get a good deal on a well-maintained car. You may also be able to get a ride for cheap by checking out cars being sold by college students — just make sure it’ll actually get you where you need to go.
The bottom line
There are many benefits to arranging financing in advance, including favorable terms, lower stress level, and the ability to get a great deal you likely wouldn’t get by going straight to the dealership. To make sure you are getting the best rates and terms possible, you should shop around, get preapproved and research the dealership.