Why Preapproved Auto Loans Make Sense

With so many credit unions and other financial institutions offering low auto loan rates, now is a great time to make that new car purchase you have been putting off. In addition, the minuscule auto loan rates are very tempting for those who may want to refinance their existing loan.

But before you go out to shop for your new ride, stop to think about your buying options. While going directly to the auto dealer seems to be the easiest route, the Consumer Financial Protection Bureau has warned consumers that dealer financing often results in higher interest rates. 

In addition, if you have ever experienced the sales pressure of the car dealer's financing department, you may want to consider a pre-approval from a credit union such as AltaOne. Auto loan pre-approvals from a credit union give the consumer greater negotiating leverage with the dealer, it speeds up the buying process and it will usually save a ton of money on the interest rate.

Check out the following pointers that will help you with the pre-approval and auto buying process:

1. Credit check Smart consumers obtain a credit history on a regular basis. Not only will it reveal your credit score (scores will vary, depending on the reporting agency), but this gives you the chance to correct errors on your credit. If your credit score is lower than you had hoped, you may want to tighten your budget and pay down some debt. This will improve your debt-to-income ratio and enhance your credit score.
2. Check out the local offers. As we mentioned, many credit unions and banks offer rate promotions. Shop around for the better deals.
3. Determine your budget.  What is the maximum car payment you can afford? What is the maximum down payment you can plop down on a new vehicle? This information will determine the flexibility when it comes to the vehicle selection and terms of your loan.
4. Visit your local credit union. The approval process is painless. Once the lender determines your eligibility, you will receive a "blank check" for a specified amount of money you can spend on a new vehicle. Once you select your vehicle, you give your "blank check" to the dealer, and they finalize the lending arrangements with your credit union.
5. The F&I guy will try to sell you. Many car dealer finance and insurance managers will attempt to offer you their own financing deals. They may have arrangements with other financial institutions that make it more lucrative for them. Listen carefully and do not let a sales pitch sway you.
6. You must carry adequate insurance coverage. All reputable auto lenders require consumers to carry a full insurance coverage on financed vehicles. This ensures that the institution recovers at least part of the loan balance in the event of total loss. If your down payment is less than 20%, you may need a GAP (Guaranteed Auto Protection) insurance policy that covers the difference between the amount the vehicle is worth as an insurance loss and the remaining loan balance.
7. Drive your new car home. You sign on the dotted line -- and now you have a new car. Stay current on your payments and enjoy that new car scent.

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