A car buyer can take nearly three months to find the right vehicle from the time they decide to start looking for a car until they drive it home. The process involved extensive online research and multiple bank and auto dealership visits.
The financing process was one of the most stressful aspects of purchasing a car. However, obtaining a pre-approval for a car loan made the whole process a lot simpler…
The pre-approval process for car loans has changed the way buyers buy cars. By pre-approving your loan, you not only save a lot of time at the dealership (or avoid it entirely), but you can also shop for your new car with more confidence.
What is the process of getting a car loan pre-approval?
FICO has found that over half of Canadian car buyers apply for financing at a franchised dealer after shopping for a car. In essence, a pre-approval of a car loan is as simple as taking the necessary steps before settling on a vehicle or visiting the dealership.
It takes the exact same steps as a car loan application to complete a pre-approval application at home, typically online. In addition to your income and credit history, the lender verifies your debt-to-service ratio and estimates your loan terms. The estimated terms guide your decision on what vehicle to buy.
An interest rate and loan term are often determined from the current value of a loan, the monthly or bi-weekly payment amount, as well as the loan term.
Why getting pre-approved for your next car is a good idea
- It helps you focus on the right vehicles
Pre-approval is a good way to avoid the phone call that says, “We’ve approved you, but”. You might need to pay a huge down payment on the car you want (that you don’t have) if you don’t have the income to do so, so the car you want is not within your reach. You might not be approved at all if you do not have a strong credit history.
With a pre-approval, you can actually find the right vehicle more accurately. You can shop within your means without the frustration of looking at vehicles you cannot afford since the total price, the expected payment, and the estimated interest rate are all upfront.
- You get access to the lowest interest rates available
A pre-approval can prove to be extremely valuable. You can shop for a car more intelligently when you know what interest rate you’re approved for. In terms of interest rates for financing, that is most evident.
- The process is speeded up
By going straight to the car dealership without pre-approval, you will wait hours or even days before you can drive off with your vehicle. It can take a very long time to approve a loan after you’ve filled out an application and met with the finance office.
When you have a pre-approval in hand, you can typically drive your new car home the next day. There are no more hoop-jumping because you’ve already washed your hands of all the paperwork.
- If you have poor credit you can still get approved
For individuals with good credit, but especially for those without credit or having bad credit, car loan preapprovals can be a great idea. Although auto dealers have access to low- and zero-interest loans from manufacturers, they may not be as well equipped to deal with people with bad credit. Before visiting a dealer, you can access the best rates and terms for your particular credit situation by getting pre-approved.
You can get pre-approved online with Approved Auto Loans, so you know what kind of loan you qualify for before you start shopping for a car.
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