Putting the Loan Before the Car
Are you buying your vehicles backward? Most people seem to. What do we mean? This: most people, when shopping for a new vehicle, go to the dealer, pick out their car, and then figure out financing.
How is that backward? You might think they don’t know their budget until they start talking numbers, but the result is almost always spending more than they intended to.
How can you avoid this costly mistake? Keep reading for a few tips and a few things you should keep your eye out for when starting your journey to buy a new vehicle.
First things first
Preapproved or prequalified? What’s the difference?
- Full credit check
- Makes you a cash buyer
- Rate locked-in, as long as the car is in the criteria of the loan
- Less back-end work with your lender
- Credit score is most likely all they looked at
- Interest rate may change for any number of reasons
- Not guaranteed, lender could deny you in the end
- More back-end work with your lender
It’s your choice in the long run. You have more freedom to do what you want with pre-qualification, but preapproval will speed up the process if you know what to do.
Knowing how much you can spend before you get to the dealership is more than putting some information into an auto loan calculator and getting a vague idea.
Going to your credit union before you even start seriously shopping is the best way to know your budget ahead of time and set it in stone.
What would my Rio Grande CU auto payments be?
Many factors go into determining the final loan amount for the purchase of a new or used vehicle. These factors include any manufacturer's rebate, the trade-in value of your old vehicle less any outstanding balance, your down payment, etc. Once the loan amount is determined the interest rate and the term of the loan will be used to estimate your vehicle payment.
The high ground
Holding the high ground in any fight is to your advantage. Negotiating the price of a car is no different. And one way to get the high ground is to have cash. That is what you have when you walk in with a preapproved or prequalified loan: cash. The dealership will get paid the second you sign the papers. And like anything, cash gets things done faster.
Having your financing squared away before you go to the dealer helps you avoid any financial markups before you close the deal. You’ve already signed the papers and have a clear understanding of what your interest rate is going to be. Waiting to figure out financing with the dealer, you could end up with higher rates, random fees, and generally just spending more than you should.
The stereotype of dealers finding random ways to up the price has truth. Mostly gone are the days of un-necessary underbody coatings or strange fees like making sure the bolts are tight and the paint is fresh.
When you have your financing in place before you even start shopping, it’s harder to sneak those fees. If the price you shook on starts going up, walk away from the table and go to another dealer. The ball is in your court. You’re helping them by buying a car; they aren’t helping you by financing it.
Getting your pre-loan work out of the way is going to vary depending on your credit union or the lender of your choice. However, many lenders have simplified the process over the past few years. So simplified in many cases that you can apply online or through an app.
The best way to get the details is to contact your lender and ask a few questions. Due to Covid, there is a chance their process has changed, depending on how you’d like to apply. Other than that, enjoy your new vehicle.
|Model Years||APR* as low as|
|2016 & Newer||7.25%|
|2011 to 2015||6.49%|
|2010 & Older||8.74%|
Example: A loan amount of $20,000 with a rate as low as 5.49% APR for 60 months would have an approximate monthly payment of $382.04.
*APR=Annual Percentage Rate. Offer requires Automatic Loan Payment transfer. Loan terms up to 84 months, depending on model year. APR may be higher, based on term of loan, credit score, collateral, and loan to value. New money only. Rates are subject to change at any time. Same-day approval on most vehicle applications. Contact Member Service Representative for more details.
« Return to "Blog"