Loan Milford

Where to Start When Buying a Car (It's Not Where People Think)

All too often, people begin the car buying process by thinking about their dream car and then determining how much this type of car would cost, whether bought new or used. For many, this seems like the optimal place to begin the process of getting a car. Unfortunately, it can lead to problems if the desired car is too expensive. The first step in buying a new or used car should instead be a financial step: Getting pre-approved for a car loan.

What is pre-approval?

Credit unions, banks, and other entities provide car loans and can give pre-approval for auto shoppers. The pre-approval letter will indicate an amount of money that shoppers are pre-approved for, plus an interest rate percentage for the loan. Loan Milford car shoppers can then take the pre-approval letter with them when they visit dealerships and use the document as a starting point for negotiations over the final price of the new or used car.

Pre-approval for a car loan helps car shoppers to commit to a car that is within their budget by laying out the maximum amount of money they can borrow, based on factors including their credit score and bank account balance.

Benefits of getting pre-approval for an auto loan

When a car shopper knows how much money he or she will quality for in a car loan, it can prevent him or her from getting attached to a car that exceeds the pre-approved loan amount and overspending on a car loan. It encourages car shoppers to develop a realistic budget (namely, one they can pay for with financing and cash reserves) and to shop for a car based on that budget.

Pre-approval also simplifies the negotiation process. Without pre-approval, car shoppers would need to keep track of a wide range of figures: the down payment, the loan interest rate, the loan term, and the trade-in value. When negotiating with loan pre-approval, shoppers know the total amount of money they will receive and don't need to worry about each figure so long as the total does not exceed the pre-approval figure.

In most cases, it's quick and easy to get pre-approved for an auto loan. Once approved, shoppers can look for their car at any local dealership and rest assured they have a solid plan to finance their new car.