Car Buying Tips: Secure Financing Before Going to the Dealership

The Power of Information in a Buyer’s Market

The internet has revolutionized the car buying process, empowering consumers with a wealth of information. From comprehensive reviews to detailed histories of used cars, buyers can now make informed decisions before ever stepping foot in a dealership. Despite this, many still neglect a critical step: securing financing in advance.

The Financial Dynamics of Dealerships

Dealerships often rely on their finance departments to generate consistent revenue. Some even sell vehicles at cost, hoping to recoup profits through financing deals. According to the National Automobile Dealers Association (NADA), finance and insurance (F&I) departments contribute significantly to a dealership's bottom line, with an average gross profit of $1,200 per vehicle sold in 2020 (NADA).

The Benefits of Pre-Approved Financing

Securing financing before visiting a dealership offers several advantages:

1. Knowledge of Rates: By obtaining pre-approval from banks or third-party lenders, consumers can understand the interest rates they qualify for based on their credit scores. This knowledge is crucial, as dealerships are not obligated to offer the lowest possible rate.
2. Negotiation Power: Armed with pre-approved rates, buyers can negotiate more effectively. If the dealership's rate is higher, they can leverage their pre-approved rate to secure a better deal.
3. Streamlined Process: Pre-approval simplifies the buying process. With financing already in place, buyers can focus on selecting the right vehicle without the added stress of securing a loan on the spot.

How to Secure Financing

Online Lenders and Manufacturer Websites

Consumers can secure financing through various online platforms and manufacturer websites. Many offer quick pre-approval processes, sometimes in as little as 30 seconds. For example, Auto Dealer Web Design firms provide streamlined pre-approval services through dealership websites.

Credit Applications at Dealerships

Some dealerships, such as Orange County Jeep Dealers and Massachusetts Dodge Dealers, offer 30-second credit applications. By applying online, consumers can have their information on file, making the in-person process smoother and faster.

The Importance of Credit Awareness

Whether you have excellent or poor credit, understanding your credit condition is vital. According to Experian, the average credit score for new car buyers in the U.S. was 732 in 2020 (Experian). Knowing your credit score helps you gauge the rates you qualify for and ensures you are not taken advantage of by dealerships.

The Dealership Experience

Once pre-approved, the dealership experience becomes more straightforward:

1. Select Your Vehicle: Focus on finding the car that meets your needs and preferences.
2. Finance Department: With your credit information already on file, the finance department can quickly offer you a rate.
3. Rate Comparison: Compare the dealership's rate with your pre-approved rate. If the dealership's rate is higher, inform them of your pre-approved rate. In most cases, they can match or beat it.

Conclusion

Securing financing before visiting a dealership is a simple yet effective strategy to ensure you get the best possible rate. It requires minimal effort but can result in significant savings. By taking this proactive step, you can navigate the car buying process with confidence and ease.

Interesting Stats

• Average Loan Term: The average loan term for new cars in the U.S. reached 69.7 months in 2020 (Experian).
• Interest Rates: As of 2021, the average interest rate for new car loans was 4.09%, while used car loans averaged 8.66% (Bankrate).
• Credit Score Impact: A credit score increase from 600 to 700 can reduce the interest rate on a car loan by up to 2% (MyFICO).

By securing financing in advance, you can take control of your car buying journey, ensuring you get the best deal possible.