In today’s market, it makes sense to arrange financing before heading to a dealership. This gives you time to explore your financing options and see what rates you qualify for before entering the dealership. It also ensures that you don’t commit to a car you can’t afford.

Benefits of arranging financing in advance

When you arrange financing before you go to the dealership, you’re more likely to get the best deal.

Favorable conditions

Before you walk into a dealership, you can get an idea of ​​the interest rates, loan term, and monthly payments you’ll qualify for based on your credit score. When you already know what rates you qualify for, you can walk into the dealership confident that you’re getting the best deal.

Lower stress levels

Sitting down with a lender — virtually or in person — before visiting a dealership can reduce the stress you feel when the dealership presents you with a financing offer. If you’re able to research and find the best loan terms for your situation, you’ll be better prepared to negotiate and make an informed choice, rather than being pressured into doing something on the spot.

You are well prepared

Arranging financing before visiting a dealership can make it much easier to make a purchase that’s right for you. With financing in place, you’ll have a better idea of ​​which vehicle makes the most financial sense, and shop for the overall cost instead of the monthly payment.

How to arrange car financing in advance

To ensure you get the best rates and terms possible, you should follow these steps.

1. Shop

Start by shopping. You can do this in two ways. Either go online to check rates where you don’t have to enter a lot of personal information or call several lenders and ask for quotes. The more quotes you request, the more likely you are to get a competitive rate. Try to get quotes from at least three lenders.

2. Research dealerships

Dealerships can be transparent about their financing options, so once you have a quote in hand, you can check the websites of any dealerships you’re considering to see what kind of rates are on offer. If the dealer offers a low rate, you can take it to the lender you work with to see if they can beat that rate.

3. Get pre-approved

The next step in arranging financing is to get fully pre-approved with the lender offering the best rate and term for your needs. This will allow you to walk into the dealership with an offer in hand, giving you even more bargaining power.

4. Negotiate to get the best deal

After being approved for financing, it’s time to shop around and negotiate the best deal. You can do this easily by visiting several dealerships with your pre-approval documents in hand. Use the fact that you already have financing to better negotiate the price of the car and circumvent common high-pressure sales tactics.

What to do if you can’t be financed in advance

If you can’t get approved for a loan before going to a dealership, that doesn’t mean you shouldn’t go. You can ask to speak to a salesperson to help you obtain financing.
If you’re still having trouble getting financing from the dealership, it might be time to take a step back.

Rather than taking out an auto loan designed for customers with bad credit or going on a “buy here, pay here” lot, it may be better to work on improving your credit and reducing your debt. There are many ways to improve your credit, but they take time. Start by pulling your credit report and reviewing it for potential errors. From there, you should focus on paying down your existing debts and lowering your overall debt-to-income ratio.

If you need a car as soon as possible, you may need to consider low credit options or a cheaper vehicle. Buying certified pre-owned vehicles can be a way to get a good deal on a well-maintained car.

The bottom line

There are many advantages to arranging financing in advance, including favorable terms, lower stress levels, and the ability to get a lot you probably wouldn’t get by going straight to the dealership. To ensure you get the best possible rates and terms, you should shop around, get pre-approved, and research the dealership.

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