When buying a car in Utah, being pre-approved by a lender before you talk to an auto dealer will put you in an advantageous position during negotiation. Unlike pre-qualification, pre-approval involves a complete official mortgage application where you supply the lender with sufficient documentation for an extensive background check. The ultimate goal is to get the word of your lender to provide you with the necessary auto loan in Ogden, Provo, or Salt Lake City and lock in an interest rate.
What difference does auto loan pre-approval make? Here’s what you can do if you are pre-approved before talking to an auto dealer, as told by Wasatch Peaks Credit Union and other industry experts:
You Can Negotiate with Guaranteed Financing
Getting pre-approved turns you into a “cash buyer,” making you a less risky customer because the lender already greenlit your loan request. Psychologically, the dealer wouldn’t feel you’re a waste of time. It makes you a more serious buyer because you have the power to close the deal with a pre-approved auto loan.
You Can Target a Particular Price
Pre-approval allows you to focus on what matters — the loan amount. Without guaranteed financing, the dealer may try to distract you by negotiating for the monthly repayment. In turn, you might lose sight of lowering number that would actually save you money, which is the real price of the vehicle.
Then again, it pays to set aside some money to cover other fees and taxes. For instance, if you could borrow $25,000, look for a vehicle you could buy for $20,000 because the final price would be one or thousand dollars more in fees and taxes included.
You Can Get a Better Interest Rate Offer
Although you’re already pre-approved, the dealer may still try to give you a better offer. If the new deal has the lower interest and other terms remain the same, take it. However, read the fine print and do the math before signing on the dotted line to make sure you’re actually saving money and not being cheated on.
Seek pre-approval from a credit union to get the most favorable deals. Generally, credit unions offer lower interest rates than banks, so make the former your first priority.