Pre-qualification is a great way to know how much of an auto loan you qualify for before visiting a dealership. It can allow you to shop with confidence, knowing that when you find the vehicle you want, you already have a good idea how your interest rate, down payment and financing term could affect your payments.
But once you get that information, what can you do with it?
Finalize your budget
Take a closer look at your pre-qualified loan amount and consider your down payment options. It’s a good idea to re-evaluate your budget to determine if you can comfortably afford the monthly payments associated with the loan amount — feel free to adjust your budget as necessary to ensure you’re prepared to handle the financial commitment.
Shop with confidence
With your finalized budget in mind, you can start looking for your dream vehicle within those bounds. Dive into some research about different car makes, models and features. Consider factors such as safety ratings, fuel efficiency, maintenance costs, and potential resale value. This information will help you narrow down your options and find an affordable vehicle that aligns with your needs and preferences.
Negotiate the purchase
It’s important to note that pre-qualification does not guarantee approval once you formally apply for a loan. That being said, a pre-qualification is an excellent resource to use during negotiations. Once you have your desired vehicle in mind, be sure to mention your pre-qualification status and stay firm on that budget when discussing financing with the dealer.
Make sure to ask if there are manufacturer incentives and rebates available for your purchase as well. Your car dealer may call it by another name, such as consumer credit, bonus cash, or a purchaser allowance, but it all means money in your pocket. These offers may range up to thousands of dollars!
It’s important to be confident and trust your research during negotiations. Don’t be afraid to go to other dealerships if the first dealer won’t budge on a price over market value.
Formalize the contract
After finalizing the purchase price and terms with the dealership, you’ll need to complete the loan application process with your chosen lender. Provide the necessary documentation, such as proof of income, identification, and vehicle information, to initiate the loan approval process. Be responsive to any requests from the lender to ensure a smooth and timely loan approval.
Once you put pen to paper and formalize your auto financing, you can drive off the lot with your new vehicle!
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.