So, a recent accident has left me car-less and my insurance money has come in. So it’s time to shop for a (used) car and all the websites say that if you don’t get pre-approved for financing before you visit the dealership, you’re a big stupid dummyhead. Not wanting to be a big stupid dummyhead, I’ve been poking around various credit union and other lenders’ sites and am still kind of confused about the process.
I’ve pretty much grasped that what I need to do is arrive at a budget and get approved for a loan for what I need. So if I plan to finance $12,000 above my cash in pocket, then get a $12k or $13k loan approved and look at cars within my range (keeping in mind taxes, doc fees, etc). Easy enough. Where I get confused is… am I supposed to complete the approval beforehand? Some sites say “If you know you can get a rate of 7%, then you can tell the dealership and see if they’ll counteroffer with 6.25%” (numbers largely made up). This would result in multiple pulls on my credit, right? Should I just not care?
If I walk in with my pre-approved offer and decide to buy, what happens next? Does the dealership have some way of completing the transaction with the lender there and then? Do I go home and wait for a check/deposit from the lender?
Thanks for any and all help. Any previous cars were financed at the dealership but I’m trying to go about it the most beneficial way this time.
Accident story leading to this
A week or so ago (Saturday before last), I was going down I-55 outside of Joliet, IL minding my own and probably about 70mph. Without me getting a chance to even see it coming, an F-150 apparently was flying down at about 90-100mph in the right lane, swerved around the car in that lane and rear ended me in the center lane. I had just enough time to recognize that I’d been rear-ended before I realized I was headed into the center concrete median divider, hit that hard and the car rolled over three times before skidding to a stop on its roof. People stopped and rushed to help me, busting out the window and cutting me out of my belt where I was hanging upside down and prying a door open for me to exit.
Fortunately, and with a nod to the safety engineers at Hyundai, I was able to crawl out and walk away with little more than a nasty scrape on my legs, some cuts on my hands from the glass, am impressive bruise across my left shoulder/chest from the belt and some other aches and pains. Cops, fire and paramedics came, I was whisked away to the hospital and released after a full CT scan showed nothing interesting going on inside.
I’m very lucky or blessed or whatever that the largest impact on my from it all is my need to buy a new car.
Thanks. The other driver (the blue pickup in the photos is what hit me) went to the right when I went left, driving through a couple of wire fences, over a frontage road through some trees and into a field. He’s a 53 year old carpenter and told the police he’d been working a string of 16 hour days and fell asleep. No idea if true or not – the state trooper who visited me at the hospital said they didn’t suspect drugs/alcohol but couldn’t do a sobriety test due to the accident trauma but I assume they blood tested when he was hospitalized. I haven’t spoken to him though and doubt I ever will.
When my then-husband and I bought a couple different vehicles financed via our credit union, theyl CU explained everything to us ahead of time and were very clear about how it worked. I just don’t remember any of it anymore. Their interest rate was several points below anything a dealer would offer. That was way back in 2008.
Yeah, this. I bought my first few cars with cash, but when I bought my dream Volvo I went through the CU. I set an appointment and told them what I was planning, they did some checking, and they came back with a pre-approval package that said as long as I was working with a legit dealer, I observed quality conditions XYZ (like age of car), and I was at or under budget N, I was good.
How did the actual purchase process go? You’re agreeing at the dealership to buy the car and then what? I guess that’s the part where I get confused. I don’t have the money from the lender yet (just approval) so how is the money getting from the credit union to the dealership so I can drive off?
I’ll almost certainly be using a lender online so sitting down in their office to go over it isn’t feasible.
I told the dealer I had pre approval, the dealer gave me relevant sale documents, I took them to the CU, the CU verified and gave me a check, I took the check to the dealer and used it to buy the car and drive away. I then paid back the CU.
I go to my credit union, get approved for a loan and they literally hand me a blank check. Granted that check is only going to clear for an amount lower than what I’ve been approved for.
You give the car dealership whatever docs and contact info you have from your pre-approved lender. A staffer at the dealership talks to them via phone, email, or fax and they futz around with each other swapping info until the dealership is sure the money is headed their way. During the same time interval you’ll also futz with faxed, e-mailed, or Docusigned paperwork from your lender to complete your part of the actual borrowing deal with the lender.
You’ll also have to get your insurance lined up. And the lender will give you detailed info to give to your insurer so that if the car gets wrecked driving home that day, their collateral is protected.
Then once you, the lender, the insurer, and the dealer are all happy with everyone else’s paperwork / electronic bits, then the dealership gives you the keys to your car & you drive off into the sunset.
If all goes perfectly, this process can take a couple hours after the handshake between you and the car salesperson. If all goes crappily, it can take a couple business days. If you are using an on-line lender, think about what their office / customer service hours are versus your dealership’s. If there are multiple time zones involved, there may only be 4 or 5 hours a day that both ends are open and not taking breaks or lunch.
If nothing else, the responses here got me looking for more local venues versus my knee jerk assumption that the best answers are online. I found a local credit union with promising rates and I’ll drop by there later today to see what they say.
Mrs. MeanJoe and I each bought a new/used vehicles a few months apart. In both cases, we got our loan pre-approved at my bank before ever going to a dealership. They approved me up to $X amount and as noted some conditions (vehicle within certain years old, etc.). They also provided me a package of paperwork including a blank check that would be completed for the purchase amount up to the approved limit. Once that check got presented to my bank, the loan was originated and started. It was super easy and takes all the bullshit out of the dealer playing games with interest rates, terms, etc. In my case the dealer presented me their financing options and all the rates were 2-3 points higher than my bank. In my wife’s case, the dealer did beat the interest rate by 1/4 point.
Think about it this way… if via your bank you know exactly what you’re approved for and at what rate. The dealer will try to play games and doesn’t have your interest in mind around rates and term. If they can get you to agree to a 1-2 point higher rate they will as they get incentivized to do so.
I recommend getting preapproved and bringing a blank check to the dealer. They love to get you to finance through them, what they don’t tell you is that they get kickbacks from the banks/credit unions and they may try multiple banks to get the best deal for them and each bank they check counts as a hard inquiry on your credit.
The last couple cars I’ve bought, the dealership took care of all the paperwork between themselves and the credit union, just as if I was financing through the dealership. I got pre-approved at the CU, told the dealer that I was financing through the CU, we signed all the paperwork, and they submitted it all to the CU. It was actually some of the most painless car buying I’ve done.
Yeah, even if you walk in with a loan they will still force you sit with their financing person. It’s possible but unlikely their guy will come up with better terms than your bank. Dealership I got my last car from actually did find me a lower rate, but I declined since I was paying it off in a week either way (I had the money but I needed the car sooner than I could liquidate the cash).
I have found that often the dealers are able to get a lower rate than I can find on my own, even with good credit, enough assets to satisfy collateral, etc. But not by a ton.
Well, I visited a local credit union today, opened an account and applied for an auto loan. Pre-qualified for what seems like a good rate compared to what I’ve been seeing in my browsing and am just waiting on approval from the underwriter. Then it’s back to car shopping. Thanks for the help, everyone.