Buying a vehicle can be an exciting time. You might even be so excited, in fact, that you’ll jump right into shopping around for your ideal car online. But there’s one step that can give you a lot of insight into where you’re at financially before you take the plunge.
Here are four reasons to consider getting preapproved for your auto loan.
Perhaps the most beneficial reason to consider getting preapproved for a vehicle or recreational loan is being able to estimate how much the purchase will cost. More importantly, it can help you pinpoint how much you can afford. You might qualify for more (or less) spending power than you anticipated, so this helps set your expectations firmly in the likeliest of scenarios. It will even help you determine what your monthly payment might be so that you can place it into your own monthly budget and see how it shakes out.
A little more knowledge and a little more confidence will give you especially powerful negotiating skills if you’re trying to settle on the most appropriate selling price on your vehicle of choice. If you have a better idea of what you can truly afford and where your ceiling is, you know how low or high you can go in both parties arriving at an agreed-upon price.
Your credit score can factor into your closing process when purchasing a vehicle. If your credit score disqualifies you from certain levels of financing, it’s nice to know ahead of time. Through the preapproval process, you’ll determine not only what your credit score is, but also what that means for your impending car or recreational vehicle purchase. It makes for even less surprises, whatever financing option you end up selecting.
A preapproval can also open your eyes to the different types of lending options you have, including varied rates and terms. Set your expectations up—will you be buying for a short-term ownership or a long-term ownership? The length of the terms might be more important to you than the interest rate—or vice versa. If you preapprove, you can see how this financial picture looks and go into the car-buying process with a more complete idea of how to proceed.