If you’re in the market for a new car, it may be tempting to start shopping for your financing options. But before you do that, it’s essential to ensure you have good credit and enough money saved up for a down payment. Here are some of the benefits of securing auto financing before starting to shop.
1. You’ll Have More Time To Shop Around
If you have pre-qualified for financing, you won’t feel rushed when searching for a car because you’ll already have a good idea of what type of loan to apply for and how much money you can spend without affecting other financial goals like saving for retirement or college tuition. That way, you can focus on finding the best deal on a vehicle without worrying about whether or not it will fit into your budget.
2. You’ll Avoid The Hassle of Negotiating Financing Terms After Purchase
When you buy without securing financing first, the dealer will likely try to sell you high-interest financing through their bank or finance company — which means they get paid twice on each car sale and are less likely to negotiate with buyers over rates or loan terms (especially if they feel like they’re already making money off of the deal). Securing auto financing first can help avoid these problems.
3. You’ll Save Time and Money
If you can afford a higher monthly payment but want to avoid more debt, waiting until after you’ve secured financing could save you time, money, and hassle. You won’t have to worry about paying interest on any money borrowed as part of the down payment or closing costs if those costs are rolled into your loan payments.
4. You’ll Know What You Can Afford
One of the first steps in buying a car is figuring out what kind of monthly payment you can handle. Knowing how much money is available for your next vehicle will make your car-shopping experience much easier. This will make it easier to focus on vehicles within your price range at the dealership. You won’t waste time looking at vehicles outside your budget, and low monthly payments won’t tempt you if they aren’t realistic.
5. You Will Get Pre-Approved for a Loan Before You Start Shopping
Once you are pre-approved for an auto loan, you can use this information when negotiating with the dealer to get a better price on the car you want. If they know you’re already approved elsewhere, they might be more willing to give you a better deal.
6. You’ll Avoid Unnecessary Interest Charges
If you don’t know how much money is available for your next vehicle purchase, it’s easy to fall prey to high-interest rates when buying a car with cash or with financing from an unscrupulous lender who promises quick approvals and low rates but doesn’t deliver on either promise once you sign on the dotted line.
7. There Will Be No Surprises When Going Into Your Dealership
People hate going into dealerships because they always seem to have something up their sleeves that they weren’t expecting. It could be an extra fee or markup on an item like paint protection coverage or an extended warranty. For example, if you’re going to finance through a credit union, then you should apply there first so you know exactly how much of an interest rate reduction they can offer you before going into a dealership and negotiating on price alone.
8. You Can Get Approved for a Lower Down Payment
If your credit history is not good enough and there are no other options available for you except for secured loans (wherein collateral such as property or stocks are used), then you can get approved for lower down payments at banks and financial institutions. Many lenders offer low down payment options if they feel they will recover their money through future loan payments.