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Your Guide to Beating the Car Salesman with the Power of Preapproval

When you’re preapproved for an auto loan you’re transformed into a “cash buyer” at the car dealer. Getting preapproved puts you in a much stronger negotiating position so you get a better deal!

Get a Better Interest Rate
Dealer financing is convenient, but if you haven’t shopped around, a dealership finance manager might try to take advantage of that and mark up the interest rate on the loan. Car salesman are only interested in getting you into the car, not getting you best loan rate.

By getting preapproved, you’ll know your interest rate ahead of time.

Know if You’re Getting a Good Deal
Speaking of interest rates, 0% may sound enticing, but it isn’t always the best deal. Many times the dealership will not allow you to take any rebates or incentives on the price of the vehicle because you’re taking preferred financing. Always ask what the final price of the vehicle is AND the interest rate. Monthly payments will be the least of your worries if you end up paying thousands more in the end. Take a look at the comparison chart below to see how the price of the vehicle is actually more important than the interest rate.

Set a Realistic Budget
Once you’re preapproved for a loan you can set a realistic budget for your purchase. Use an auto loan calculator to add in other loan factors, such as a down payment or trade-in amount, and add about 10% for sales tax and other fees.

Simplify Your Experience at the Dealer
Another good thing about having financing in place is that the dealer will see you as a cash buyer – someone who has the money in hand and can walk away from the deal at any time. That puts the negotiating power back in your hands.

Without preapproval, here’s how the car price negotiation game might go:

Car salesman: “So, what monthly payment are you looking for?”
Watch out. If you name an amount, they’ll negotiate on that number instead of the one you really want to talk about, which is the price of the car.

You: “I’m a cash buyer. Let’s just talk about the price of the car.”

If you’re negotiating the monthly payment rather than the car price, they might try to inflate the payment with charges or fees that often have nothing to do with the price of the vehicle. If you get preapproved, you can avoid this sales tactic.

Negotiate More Effectively
As you’re negotiating and closing the deal, you can use your preapproval as an easy way to decline add-ons and extended warranty offers that you don’t want. Just say, “I’m preapproved for this amount and I’m not going over it.”

Get Preapproved and Lock in Your Rate for 90 Days
If you’re not ready to buy yet, at MONEY Federal Credit Union you can still get preapproved and lock in your rate for 90 days while you shop. Take your time, find that perfect vehicle, and negotiate a great price without having to worry about financing – it’s already done!

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