Buying A Car Question?

Question

My question is, what do I do first -

Do I go to my credit union first to get pre-approval for a loan then go to dealers a price the car I want -

-OR-

Do I get a bunch of different quotes from dealers, then after I found a price I like, I go to my credit union and get approved for the loan.

I personally thought that I would do the second, but considering I have never bought a car before I would like to know if I am correct before I proceed.

Answer 1

You are always better off to go to your credit union first. The reason for this is simple. When you go to a dealership and find the vehicle you want, they are going to pressure you to take delivery right then because they know that only a very small percentage of customers actually come back after they leave.

I have been in the car business for over 7-years now and I have seen some pretty shady things.

The other reason you should get your own financing is that dealers get whats called a buy rate, this is the rate that the lender charges the dealer. The dealer will then bump that rate anywhere form 1-3 points before signing you to a contract. This creates whats called reserve profit that is split between the lender and the dealer.

By having your loan approved before you go into the dealer you will be in the drivers seat. Do not reveal that ou have your own money until you have negotiated the best price for your vehicle. Then when you get into the business office you can just write a check and walk out. Also, if you happen to have a trade? Do not reveal this either until you have agreed on the lowest price.

Answer 2

A lot of banks and credit unions will do a pre-approval for you as a service. This is useful in several ways: You know exactly how much of a loan you can get (you can always buy a car that costs less, but it will keep you from wasting your time on cars that you won't qualify for because they're too expensive). Also, it helps with negotiations because when you're ready to talk to the dealer, you can say, "I have $X to spend. That's it. if the price is higher, we don't have a deal."

You can do it the other way, but it's a lot easier to get a pre-approval, I think. The bank will even give you a letter to take to the dealer saying that you're pre-approved.

Try not to get a loan longer than 3-4 years, or you'll wind up "upside down" on the vehicle, meaning that there will be a point in time where you owe more than it's worth. That can be bad if you have an accident that totals the car.

Answer 3

How is your credit? Alot of times a loan will depend on what type of car you want to buy. A bank will only loan 135% of the loan value of the car ( best case cenario with great credit). So if the bank says the car is worth $20,000.00 they wont loan you $30,000.00 for that car. This protects them from losing too much money if you dont pay up and they have to reposses the car. This may be important if you are shopping for a used car versus a new car. My advice as a retired car salesman is to shop several dealerships untill you find the best deal on the car of your choice (you will know their bottom dollar price when you get them to lower the price significantly, and then walk away from them, if they are holding any gross profit they will not let you leave the dealership with out offering you a better deal) Once you get the best deal then see what financing they have and then go to your credit union. Car salesman hate credit unions because they usually allways have lower interest rates. Get a bill of sale from the dealer to bring to the credit union and get your loan. As for being upside-down, you can buy gap insurance to fill in the excess debt owed upon an accident totalling the vehicle. 99% of people are upside down when they buy a car because of depreciation-I highly suggest spending an extra $5- $10 a month for gap insurance! Hope this helps you out- feel free to e-mail me w/ any other questions

Answer 4

Usually people have the vehicle picked out first...that way the financial institution will be able to look up the value and make sure the loan amount will not be over the value. Plus there are other factors that will effect the payment amount such as the year of the vehicle will change the interest rate, loan term, ect... I do know a few people that have gotten pre-approved for a vehicle loan payment amount but that usually is not the norm (well in the area of the country that I live in anyway).

Former Loan Officer

Answer 5

I just bought a car on Saturday and was confused myself. First shop around. If you are buying a used car wait til you find the car you want. You can put a deposit on the car so you have time to get a loan. If you are buying a brand new car, you can get the loan through the dealership. Never get a loan first since you do not know the true value of the car until you speak with the dealership. Good luck car shopping!!

Answer 6

First off, buying a 'new' car is a flip. You can see the 'flip' at the Used Car section of a lot.
That $20,000 new car with 200 miles on it, or less. is a Used car, it is worth $15,000,if that.
You will not see many of the 'flip' cars at a new dealer, but visit an auction and you will get an eyefull. Once the new car is bought, it is a USED Car, this 1 owner car can be devaluated by 35%-50%.
Shop the market, get what you like, what you can afford and what makes sense.
That is biz 101.

Answer 7

it would be best to get a pre approval first. This way the dealership won't try to give you the old, "Let me go see what my manager can do" He will know what you have to work with and will get what you want for that number.

Answer 8

Go get an idea of the max amout your car would cost. Get approved for that amount, then go by the car. They'll do thepaperwork and you'll only get the amount that your car sells for, not necessary the amount you get approved for.