How to get the most out of your auto loan
Between pushy salespeople, multiple financing options, and lots full of too many vehicles to count, shopping for a new car can be a stressful time. Luckily, we can help take some of those worries away.
In this blog, we will give you three simple steps to secure your financing so you can walk into the dealership and purchase your dream car.
1. Know your credit score.
The first thing you should always do when you are interested in applying for a loan is check your credit report.
Each major credit bureau is required to give you a free copy of your credit report every year. Use Annual Credit Report to pull your report from Equifax, Transunion, or Experian with no penalty to your report.
This will allow you to see your credit score and report and give you a good idea of what kind of financing and APR you will be approved for.
2. Understand dealership tricks.
At the end of the day, dealerships are looking to make the most money off of you. They employ sneaky tactics to make it seem like you are getting a better deal than you are.
Here are some common tactics you need to watch out for:
Dealers prey on lack of information. If you have a specific car in mind, make sure to do research to find out how much it has been historically sold for in your area. Otherwise, dealers may sell it to you for more than it is worth.
They will make it all about the monthly payment. They will try to convince you that you can afford the fully decked out model because they can make the monthly payment low for you. Yet the only reason they can make the payment so low is because they stretched out your term to eight to ten years, locking you into more debt than you originally anticipated.
They will markup your interest rate. Legally, auto dealers are allowed to take on a few extra percentage points to your loan. So while the bank they are working with may have approved you for a 4% loan, the dealership will sign you on to a 6% loan. This lack of transparency will literally cost you money.
They will push you into a lease. A lease looks attractive on the surface because you get to trade in for a brand-new car after a few years. But really, it is a rotten deal. You make a monthly payment on the car, just like an auto loan, but at the end of the term, you own absolutely nothing. And on top of it, the dealership can charge you when you try to trade in your car for arbitrary things like going over a set mileage per month or small cosmetic imperfections.
3. Get pre-approved.
This is important. Before ever stepping foot in a dealership, you should set your budget and apply for pre-approval on an auto loan. Dealing with pushy salespeople and finance offices trying to upsell you at every turn will make car buying a much bigger hassle than it needs to be. When you walk into a dealership with your financing already in place, you do not need to worry about the dealership’s sales tactics.
As a POECU member, you can get pre-approved for an auto loan right from your home when you apply online.
You can also use our virtual car buying service to pick out your car and apply for your loan before you ever need to walk into the dealership, making the process a breeze.