Get preapproved or finance through dealership?

[HeXen]

was curious, considering new car soon. Is it advisable to get a pre approval auto loan from my bank or finance through the dealership. Don't the banks the dealerships use charge application fees and typically a higher percentage rate?
Pro's/Con's of either or?

 

[satyajitmenon]

Pre-approved.

I can't think of any benefits of going with financing through the dealership - unless they're offering less than your bank/credit union.

 

[Capt Caveman]

Depends.

I purchased a new car a couple of months ago. I got the dealership to accept my lower offer after I told them I would finance thru them and got 2.49% for 63 months.

 

[ZetaEpyon]

I don't see how it could hurt to get preapproved for a loan at your bank or credit union or whatever. It's not like you have to use it when you make the purchase.

When I bought my speed3 four years ago, I was preapproved by my bank before I went in, and the dealer was able to offer me a better rate, so I took that.

Edit: Also, going in with financing pre-approved may make it easier to negotiate based on the actual purchase price, rather than on monthly payment.

 

[Doppel]

Pre-approve is good unless the dealership is using a manufacturer-sponsored rate like .9% APR, etc.

 

[Pariah]

Depends on what the dealer is offering. When I bought my last car, they were offering 0%, so I never bothered looking elsewhere. If they aren't running something like that always shop around for the best rate and have something to bargain with when you show up. Credit unions typically run lower rates.

 

[HeXen]

I don't see how it could hurt to get preapproved for a loan at your bank or credit union or whatever. It's not like you have to use it when you make the purchase.

When I bought my speed3 four years ago, I was preapproved by my bank before I went in, and the dealer was able to offer me a better rate, so I took that.

Edit: Also, going in with financing pre-approved may make it easier to negotiate based on the actual purchase price, rather than on monthly payment.

good idea. i'll do that. thanks all for the input.

 

[exar333]

Depends on what the dealer is offering. When I bought my last car, they were offering 0%, so I never bothered looking elsewhere. If they aren't running something like that always shop around for the best rate and have something to bargain with when you show up. Credit unions typically run lower rates.

When I bought my last car a few years ago, I had financing all lined-up through a local credit union before going to the dealer. After I got the car, the same credit union was one of their business-partners and they got me an even better finance rate that I could get myself.

I like to have credit approval lined-up beforehand, but most dealers have good relationships with both banks and local credit unions, so I am fine if they can get me a better deal. A better deal is a better deal, right?

 

[JeffreyLebowski]

I've always had better luck getting financing through the dealership. I've consistantly gotten lower rates than what any bank or CU has offered.

 

[IcePickFreak]

I'd watch for any incentives they have going on. I financed mine through the deal in 09 with 0% interest.

 

[exar333]

I've always had better luck getting financing through the dealership. I've consistantly gotten lower rates than what any bank or CU has offered.

Exactly. The dealers usually have a good relationship (or you would hope they do) with some loan officers/underwriters art CUs and they can often negotiate a better deal. When you go into a CU or bank for a loan, it means you are interested in getting something, maybe. When you are in a dealership, with a car picked-out and price negotiated, there is more incentive to deal beause you are ready to buy NOW. Plus, the dealer can get the banks or CUs to compete with each-other for the business, which is good for you.

I only deal with car dealerships where I feel comfortable with both the sales staff and financing department. I have gone over salesperson's heads to a manager, gone to a different salesperson, or left entirely. If the sales process leaves a bad taste in your mouth, all you are doing is entering a world of trouble at that dealership. How will they treat you AFTER you already bought the car? Pretty obvious...

Anywho. Get financing lined-up AND see what the dealership can do. Nothing wrong in throwing a big net to get the best deal for yourself. Plus, I have found it helps negotiation with the car price because you are just haggling over the price and let them know you have the payment already covered and move on. At that point, they have no idea if you have cash or financing, but they know you are serious and have the means to get the car with or without their help.

 

[KIAman]

No brainer.

Always get preapproved to show the dealer you are serious.

Then choose the financing option that gives you the best deal.

Here is how you approach the dealer.

Walk to dealer, choose the hottest girl, or the nerdiest looking guy. Say "Hi, I want to buy a car. According to this (whip out preapproval), I am approved to buy up to ($ amount). Now here are my requirements of the car I want (list out your wants). Can ya help me?"

Wear something business casual, good pair of shoes. Act like you want to buy a car but you got a zillion other options out there. Maybe even suggest that your family takes your car advice very seriously, etc. You want to make them WANT to give you a deal.

 

[JCH13]

I'd get pre-approved just as a bargaining chip.

I've found a good way to get a deal is to say: "I will buy (some car), today, for (name your price)." Works like a charm if your price is anywhere near reasonable. I got my MS3 under invoice doing that. If you say "I will buy today if..." many doors open.

 

[Mursilis]

Get financing lined-up AND see what the dealership can do.

This. It's just win/win that way.

 

[bryanW1995]

I don't see how it could hurt to get preapproved for a loan at your bank or credit union or whatever. It's not like you have to use it when you make the purchase.

When I bought my speed3 four years ago, I was preapproved by my bank before I went in, and the dealer was able to offer me a better rate, so I took that.

Edit: Also, going in with financing pre-approved may make it easier to negotiate based on the actual purchase price, rather than on monthly payment.

This is the way to do it. Often, even most of the time, the dealer can meet/beat your deal but at least you know what the worst rate that you'll get will be. Sometimes dealers have extra rebates associated with dealer financing, however, so be prepared to jump on those deals as long as the rates are competitive. If you have specific questions PM me, I'm a dodge dealer.

No brainer.

Always get preapproved to show the dealer you are serious.

Then choose the financing option that gives you the best deal.

Here is how you approach the dealer.

Walk to dealer, choose the hottest girl, or the nerdiest looking guy. Say "Hi, I want to buy a car. According to this (whip out preapproval), I am approved to buy up to ($ amount). Now here are my requirements of the car I want (list out your wants). Can ya help me?"

Wear something business casual, good pair of shoes. Act like you want to buy a car but you got a zillion other options out there. Maybe even suggest that your family takes your car advice very seriously, etc. You want to make them WANT to give you a deal.

Haha, no offense, but you act like you read that in a book.

 

[Pariah]

When I bought my last car a few years ago, I had financing all lined-up through a local credit union before going to the dealer. After I got the car, the same credit union was one of their business-partners and they got me an even better finance rate that I could get myself.

I like to have credit approval lined-up beforehand, but most dealers have good relationships with both banks and local credit unions, so I am fine if they can get me a better deal. A better deal is a better deal, right?

Absolutely. I got financing through a dealer on a previous car I purchased at a decent rate through a credit union. A couple of weeks after I had purchased the car, I got a letter in the mail from the credit union saying they had re-reviewed my credit and dropped my rate by 2%. I had already bought the car and signed off on the terms, so I have no idea why they did that, but I sure wasn't complaining.

 

[bryanW1995]

Absolutely. I got financing through a dealer on a previous car I purchased at a decent rate through a credit union. A couple of weeks after I had purchased the car, I got a letter in the mail from the credit union saying they had re-reviewed my credit and dropped my rate by 2%. I had already bought the car and signed off on the terms, so I have no idea why they did that, but I sure wasn't complaining.

The dealership used the wrong tier when they signed you up, and they didn't catch it when they sent in the papers. For example, say the A tier rate requires 700+ beacon and is 4%, but the B tier rate is 660-699 and is 6%. They might have only looked at your equifax (695) and not pulled your transunion (708) so they charged you a too-high rate. If they had caught it they would have called you to re-sign at the lower rate and made themselves look like hero's (when really they screwed up in the first place). They were so bad, however, that they didn't even catch their mistake. Good thing for you that the credit union caught it!

 

[Pariah]

The dealership used the wrong tier when they signed you up, and they didn't catch it when they sent in the papers. For example, say the A tier rate requires 700+ beacon and is 4%, but the B tier rate is 660-699 and is 6%. They might have only looked at your equifax (695) and not pulled your transunion (708) so they charged you a too-high rate. If they had caught it they would have called you to re-sign at the lower rate and made themselves look like hero's (when really they screwed up in the first place). They were so bad, however, that they didn't even catch their mistake. Good thing for you that the credit union caught it!

That's possible, but I had gotten all three of my scores when I had started my search and they were all in the low 800's. I've never heard of a tier above the one that starts in the low/mid 700's. So unless the dealership pulled someone else's numbers, I'm not sure how that could have happened

 

[Zap]

Depends on your credit rating and if the dealer is offering a lower rate. There are often deals through the dealer (I've gotten 0.9% twice) and if you have good enough credit, then go through the dealer.

 

[Capt Caveman]

I'd get pre-approved just as a bargaining chip.

I've found a good way to get a deal is to say: "I will buy (some car), today, for (name your price)." Works like a charm if your price is anywhere near reasonable. I got my MS3 under invoice doing that. If you say "I will buy today if..." many doors open.

Works both ways, dealerships prefer that you finance thru them and can approve you in ten minutes. For me, financing thru them got me a lower price. I planned on paying in cash but told them I'd finance thru them if they'd meet my price. They did.

They were promoting 2.9% but having a good credit score, they gave me 2.49%, fully knowing that I may just pay the whole loan off in the near future.

 

[HeXen]

Say "Hi, I want to buy a car. According to this (whip out preapproval), I am approved to buy up to ($ amount).

If i'm preapproved for a fair amount more than the cost of the car, wouldnt that be their incentive to not negotiate better prices? Seems like they would think, hey, this guy has 5 grand more, so why not stay firm on advertised price or i'll get him for this or that?
I plan to get some options, so i'm going for a higher amount than what it'll actually cost to give me some buffer.

 

[rdp6]

Determine what you can really afford with pre-approved financing rates. This sets your OTD price ceiling.

Apply for dealer financing. If they beat your pre-approved rate then take it and smile but don't attempt to recalculate your pice ceiling unless there was some killer feature juuuust out of your budget with the pre-approved rate.

In late April USAA approved for me a bit over $35K at 3.99% for 72 months. Ford dealer arranged for 2.49% through US Bank. Dealer showed me my credit report score: around 820. I went to the local US Bank branch to make the first payment in person and get an autodraft application and saw their banner advertised rates as low as 3.99%. If I knew there were rates available below the advertised rate I would have tried harder with other banks, at least try to speak with a human at USAA.

EDIT: I have never paid application fees. I have now financed 3 vehicles (1998 Chevy, 2007 VW, 2011 Ford) through the dealership, beating pre-approved rates substantially every time.

 

[CptCrunch]

On my last car purchase (1.5 months ago) I went in with 2.49% pre-approved through PenFed. I told them that I already had financing and unless they showed me a lower rate, STFU and TakeMyMoney. Dealers get kickbacks if they finance you so they found a better rate at my bank (PNC) at 2.19%. Had I not already been pre-approved for 2.49%, I wonder if they would have given me the same rate.