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Car shopping for most of us is stressful and sometimes overwhelming. With average new car prices topping $31,000 and used cars averaging over $21,000, shopping without a plan and a little research will cost you thousands.

Yes, thousands. It can happen by paying even one more point on your loan rate, or not getting the lowest price you can from a dealer.

Some people can pay cash for their vehicles and drive a hard bargain. For the rest of us, pre-approval is the next best thing for keeping your costs and payments as low as possible.

Here are 5 ways getting pre-approved for your vehicle loan will save you money.

1.  It Sets a Budget

  • You’ll know how much car you can buy and what your monthly payment will be, since you worked it out with the credit union ahead of time.
  • Because you’ll know your budget, you can easily stick to it. The salesperson can’t bedazzle you into a more expensive car or upsell pricey options.

The purchase price of the car should be about 10% less than the pre-approved amount because you need to factor in gas, insurance, and some maintenance.  Maybe “stick to your budget” doesn’t sound sexy or fun. But hey, extra debt is also not sexy or fun.

2.  Pre-approval gives you one-stop shopping

  • Since White Sands FCU keeps close track of the local market, they’ll always have very competitive car loan rates. You can apply once and know you’re always going to get a great rate.
  • A pre-approval lets you concentrate on finding the car you want at the price you want. When you find the perfect deal, you can jump on it right away without waiting to apply.

3.  Pre-approval gives you negotiating power

  • You’re not tied to one dealership when you have a pre-approval. You can walk away anytime you’re unhappy.
  • You can focus on the price of the car versus the monthly payment. Salespeople often want you to focus on the monthly payment.

If you remember from a previous article, ABCs of Car Loans, a vehicle loan is made up of the principal, the interest and the term. If car salespeople get you to focus on the monthly payment, they can manipulate the other parts to increase their profit.

Here’s an example of how a dealer could entice you with lower monthly payments by extending the term and raising your rate.

Car PriceAPR*TermMonthly PaymentTotal Cost of Loan with
$25,0004.00%60 months$460$27,625
$25,0005.50%72 months$408$29,408

Sure, that lower payment looks good at first glance, but that extra year of payments will cost you $1,783. That’s a roundtrip flight for 2 to Bermuda, or an 85” 4K UltraHD TV.
Automakers offer incentives at certain times of the year – don’t ignore them if you qualify (read the fine print). Compare the options you’re offered using a car loan calculator.

4.  Pre-approval lets you act like a cash buyer

  • You can keep the conversation focused on one number, purchase price – your monthly payment is not the salesperson’s concern.
  • You can push for the lowest out-the-door price.
  • If you did your research and found the car you want online, you can ask a local dealer for a price-match. For more fun, start a bidding war. Contact the online sales departments of several dealers stating the car you want and the price you want them to beat.
  • You may not want to mention your pre-approval until you’ve got a firm price on the car you want. The salesperson could be less flexible if they know you won’t be financing through them.

5.  Pre-approval saves you time, and time is money

  • You save yourself time wasted waiting in the finance office.
  • You can use your pre-approval amount as a way to quickly and firmly say no to add-on sales pitches and other extras.

Put Yourself in the Driver’s Seat

Who wants to wait until after you’ve fallen for a car to sit down in the finance office of a dealership to find out your credit score, rate and approved amount?  Instead, set yourself up to save money and be the one in control.

Getting pre-approved helps you stick to a budget, gives you bargaining chips, lets you act like a cash buyer, and saves you time.  You’ll get the right car for you (win), save yourself money (win) and become a master negotiator in the process (win). That’s at least three or four wins in one!

As a member of White Sands FCU, you’re already starting with an advantage; we consistently have extremely competitive rates, and all decisions are made right here fast by our experienced loan officers. Start with our online application, call us or come in and we’ll help you get started.


 * APR: Annual Percentage Rate.