Is an Auto Loan Pre-Approval Necessary?

When the time comes to purchase a car, it can be exciting. Your car reflects you and your personality, so exploring different models and features is fun. With all this excitement in the air, it’s easy to be drawn to the dealership to see the vehicles up close and schedule a test drive. However, that’s one of the first and biggest mistakes when it comes to car-buying.

Dealerships will use every sales trick and tactic they know to close the deal right then – whether you are ready to buy or not. This scenario can cost you significantly if you agree to financing terms that might not be in your favor.

Before you ever step foot into a dealership, arm yourself with one of the most powerful car-buying tools – a pre-approval.

What is an Auto Loan Pre-Approval?

woman with car

Today, everything is about convenience. That trend extends to car-buying as well. If you have decent  credit, you can likely walk into any dealership and finance a new car. However, while that can save a bit of time, it can also be a costly mistake.

A pre-approval means that you applied for a car loan before going to the dealership. If you apply and are approved for an auto loan at Hartford Federal Credit Union, you will receive a pre-approval document that informs the dealership that you are pre-approved to purchase a vehicle up to a specific amount. When you find a car you like, the dealership will use your pre-approval to complete the purchase, and your financing will be set up through the Credit Union. 

Like many car dealerships, Hartford Federal Credit Union offers GAP (Guaranteed Asset Protection) programs to protect your investment, often at a fraction of the cost. We also offer Mechanical Breakdown Protection to help cover some unexpected major repairs, as well as Credit Life and Disability Insurance Protection.

What Makes a Pre-Approval So Beneficial?

A pre-approval is more than just a buzzword. It’s a powerful tool that ensures your car-buying experience goes smoothly, and there are no surprises regarding your loan’s monthly payments.
Here are a few ways that a pre-approval can enhance your car-buying experience:

  1.  Easier Budget Management: Pre-approvals empower you to navigate your car-buying journey with a clear understanding of your financial boundaries. By knowing the maximum loan amount you qualify for, you can set realistic expectations and avoid the temptation of overspending. Armed with this knowledge, you can confidently explore vehicles within your budget, ensuring financial stability along the road ahead.
  2. Enhanced Negotiating Power: With your pre-approval in hand, you have a powerful bargaining chip. Sellers perceive pre-approved buyers as more serious and financially capable, which gives you an instant edge in negotiations. Knowing you have financing locked in allows you to focus on securing the best price for the vehicle without the pressure of arranging funding on the spot at the dealership. Plus, dealers know they cannot sell you more than your pre-approved amount, thus eliminating many pricing games along the way.
  3. Streamlined Comparison Shopping: Shopping for a car can be overwhelming, with countless makes, models, and financing options vying for your attention. Pre-approvals simplify this process by providing a clear framework for comparison. Knowing that you have financing in place, you can instead focus on comparing vehicles based on their distinct features rather than the terms of financing. This streamlined approach saves time and energy, enabling you to make a well-informed decision without feeling rushed or pressured.

A Few Words of Wisdom

A pre-approval can help you secure a better deal on your vehicle and streamline the car-buying process. However, just because you visit a dealership armed with a pre-approval doesn’t mean you’re invincible from games and gimmicks.

Salespeople will often tell you they can secure better financing for you with another lender or through the dealership. These comments are a red flag because it usually means they are trying to lure you into buying a car outside your price range or making room in your budget for costly add-ons.

We’re Here to Help!

By understanding the pre-approval process and leveraging its benefits to your advantage, you can embark on your car-buying journey feeling empowered. Whether you’re an experienced buyer or a first-time owner, pre-approvals are a powerful tool that allows you to make informed decisions, negotiate with confidence, and ultimately drive away in the car of your dreams at a price well within your budget.

If you’d like to learn more about our Auto Loan options and how we can help you get in the car of your dreams, we’re here to help. Please stop by any of our branch locations to speak with a team member today.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.