Should I Get a Preapproved Car Loan?
It is easy to get caught up in the emotion of purchasing a new car. Once you have seen the car of your dreams you might think it is easy to simply obtain your car loan from the dealership because it will save you a lot of time and effort. But the fact is car loans are far more important than that, and you should not make a quick decision, especially in the heat of the moment when the car of your dreams is in front of your eyes.
Consider this. The real price you pay for a motor vehicle is not what the dealer charges you, it is how much you have to pay back to the bank. You may think you are purchasing a $30,000 motor vehicle, but if you take out a car loan for that amount over five years at 10.5% you are really paying $38,353.43, because that is how much the loan costs.
Many people spend a lot of time negotiating the best price from the dealership when they really should be spending more time negotiating the best car loan because that is where real savings can be made.
In the above example, paying the same car loan at 10% interest per annum will bring the total cost of the loan to $37,928.61. Although this is only a saving of $424.82 it is much easier to get the discount on a car loan than it is on the price of a motor vehicle. The best part of this process is that it is quite easy to get a better car loan when you simply shop around.
Getting your loan preapproved before you start shopping for your car makes real sense. If you follow these easy to understand tips you will march into the showroom and make an instant offer knowing that your finances are sorted out so you can make a rational decision about your car.
- Do a budget. This simple step will give you much more bargaining power than you realise. This is because you know exactly how much you can commit to in terms of loan repayments and still maintain a comfortable lifestyle. Once you know the maximum amount you are prepared to pay in monthly repayments you can scale your loan applications accordingly.
- Get quotes from several lenders. Be prepared to do a little legwork and visit at least three lenders to get a quote on car loans. Make sure you are aware of any additional costs like monthly account keeping fees or early repayment fees. These two factors alone can save you hundreds and maybe thousands of dollars over the term of the loan.
- Once you have your loan approval in hand you need to maintain a firm resolve when visiting the car showroom. Don’t be tempted into adding unnecessary accessories. Rather, negotiate a better price on the car if you want to incorporate accessories because you want to make sure you always stay within your budget.
These simple factors make obtaining a preapproval for your next car loan a no-brainer.
