Why You Should Get Pre-Approved for a Car Loan Before You Head to the Dealership

Heading to the car dealership just to look around isn’t a bad idea if you need a new car, right? Just because you look doesn’t mean you have to buy, right? Well, if you’re not concerned with price or the type of loan you wind up with, then this type of thinking is perfectly fine. If you’re price-conscious like the rest of us, on the other hand, and want to get the best deal on your new ride, you should do some homework before you hit the dealership.

Not only should you research the fair value of the vehicle you’re considering and shop around and negotiate to get the best price, you should also shop around for a loan. While shopping around for a car loan doesn’t sound nearly as fun as shopping for an actual car, it’s essential if you want to avoid getting ripped off.

The idea behind getting pre-approved for a car loan is simple: By shopping around for an auto loan, you’ll enter the dealership with a good idea of the interest rates and terms you can expect — and if you’re pre-approved for a car loan, you’ll have an extra bargaining chip with the dealer to help you get a low rate, which will make your new or used car more affordable in the long run.

The Benefits of Getting Pre-Approved for a Car Loan

The auto-research experts at Edmunds agree that loan shopping before you reach the dealership is a must. “The problem with starting your car financing at the dealership is that you don’t know whether the loan you’re being offered is the best financing you can get. It can also complicate the negotiations, and limits where you can shop to get the best price,” notes Edmunds.com. “The best way to counter this is to get pre-approved for your car loan. Getting pre-approved for a car loan is the closest you can come to the perks of paying with cash while not having to save up for months or years in advance.”

Where having the cash to pay for a car can give you an edge at the dealership, getting pre-approved for a loan is the next best thing, because it makes you less reliant on the dealer’s financing options. Here are some notable benefits of having your car loan squared away before you hit the dealership:

Get a better interest rate.

Shopping around is always your best bet when you’re trying to save money, and shopping for a car loan is no exception to that rule. By getting a few different quotes from various lenders, you can ensure you’re getting the best interest rate and loan terms possible.

Know how much you can actually afford.

Shopping for your car loan separately can help you create a realistic car budget to adhere to without the pressure of a dealer’s sales pitch in the background. When you shop ahead for your loan, you’re more likely to understand the type of payment you’ll end up with based on how much you spend, and you can take your time to evaluate the numbers without a salesman bearing down on you. By knowing this information before you shop, you can focus your energy on cars in your price range and avoid the rest.

Make your shopping experience easier.

When your car loan is already taken care of, your dealership experience will be a lot less complicated. You’ll be treated more like a cash buyer, which means you can focus your energy on negotiating the price of your car versus the car loan itself.

Gain the upper hand in negotiations.

As the next best thing to a “cash buyer,” you’ll have the upper hand when you negotiate with the dealership for the best deal. Since your financing isn’t tied to the dealership, you can take that pre-approval to any car dealer in town, and they know it.

And with a pre-approved car loan offer in your hand, you’ll have a set price you don’t want to stray from. When it comes to the add-ons and upgrades dealers try to sell you at the end — or the well-known tactic of stretching out your auto loan to seven years and focusing only on the lower monthly payment — you won’t fall for it, and you’ll have ample reason to say “no.”

Choose the best financing option in the end.

The best part about getting pre-approved for an auto loan is that it’s not set in stone. If the dealer you choose just so happens to offer an awesome financing deal after you agree on a purchase price, that’s just icing on the cake.

Since some dealerships offer 0% APR financing and other amazing deals at certain times of the year, this is important to consider.  Remember, just because you approach the dealership with a pre-approved car loan doesn’t mean you can’t choose dealer financing in the end if it’s a better deal.

The whole point is that, with a pre-approved car loan, you’re the one in the driver’s seat.

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  1. it is important that you study the contract carefully as some offer additional products and services. no credit check car loans


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