Are you in the market for a new car in Australia? If so, you’re probably considering your options for a car loan, joining the millions of Australians that already have some kind of vehicle finance.
A car loan pre-approval is essential in such cases. It’s something that an expert broker will help you with and something that could make your car search quicker and easier.
So, what exactly is a car loan pre-approval, how does it work, how do you get it, and what are the benefits?
Getting a car loan isn’t as simple as deciding you want a new vehicle and then contacting a lender. They need to be assured that you can meet your repayment obligations and ultimately pay off the loan.
That’s where the pre-approval comes in. It’s a loan agreement in principle, with the lender stating that they will lend you a specific sum. It’s not a guarantee. It’s conditional, so the lender can still refuse the loan if your circumstances change, or the vehicle is not suitable. Once you choose a car, you can complete a full car loan application and receive unconditional approval, which means the car is all but yours.
Keep reading to discover why it’s best to prepare a pre-approved car loan before you search for a new vehicle.
Salespersons want buyers that are serious. They don’t want to waste their time on window shoppers. If you show up with a pre-approved loan, they’ll pay more attention to you and might be open to negotiations.
Put yourself in their shoes for a moment. If someone without a pre-approval shows up at your dealership and expresses an interest in a vehicle, you don’t know if they are ready or capable of buying. They might push for a discount, and you might even entertain it, but you know there’s a high chance they’re not ready to buy or can’t even afford the car.
On the other hand, if they reveal a pre-approval, you know they can afford it, and as they went to the trouble of getting pre-approved, you also know they’re ready. You’ll pay much more attention to them as a result and will be more inclined to discuss discounts.
It’s easy to get carried away when shopping for new cars. You have a rough idea of what you can afford and what you need, but then something bigger, better, and considerably more expensive catches your eye.
Before you know it, you’re seriously considering increasing your budget and moving some funds around to make it work. It might work, but if you can’t afford it, you probably won’t qualify for a car loan, so it’ll be a waste of time.
Getting a pre-approved car loan will ensure you stick within your budget, keeping you on the right track.
Imagine shopping for a car you think is within budget, going for a test drive, falling in love, planning your purchase, and then struggling to find a lender who will give you the funds. It’s a story told by countless customers, and one that can be avoided with a pre-approval.
There’s no ambiguity once you have that piece of paper. It makes it clear what you can afford and thus avoids the stress and disappointment of discovering you’re shopping in the wrong price range.
Pre-approval is the first part of the car finance process. When you complete this step and then find your perfect car, the rest of the process should go quickly and smoothly. This is ideal if you’re working to a very tight timeframe, but you don’t need to be on a deadline to appreciate a little more haste in what can often be a slow process.
Your pre-approval is not set in stone. You can increase the deposit amount or take a smaller sum if needed. It’s also not fixed to a single dealership or manufacturer, so you have the freedom to shop around and explore your options.
A car loan pre-approval is also essential if you’re buying a car at auction. It’s not the preferred route for most Australian drivers, but if you know what you’re doing, you could save thousands.
Pre-approvals typically involve a soft credit check, which means it won’t appear as a negative mark on your credit report and shouldn’t impact your score. At the same time, however, it gives you the peace of mind that comes from knowing you can get the loan without issue.
Lenders and sellers will also look at you more fondly. It lets you cut through the nonsense, and that counts for a lot once the negotiations start.
You can be rejected for a variety of reasons, including bad credit, an excessive amount of debt, and an incomplete application process. Furthermore, getting pre-approval for a car loan doesn’t mean that you’re guaranteed to get the loan. You could still be rejected if any of the following things happen in the interim period:
All these issues can be remedied, so it’s not the end of the world. Discuss them with your broker to find the best course of action.
Getting pre-approved for a car loan can make a big difference to the car buying process. It will save you time and hassle, and if you’re prepared to give your best at the negotiation table, it could save you some money.
Need a little more guidance? Talk to one of the expert brokers at Fox Finance Group. Our lending specialists can help you to secure the best car loan by scouring dozens of lenders and hundreds of loan products across Australia. We’ll assist with pre-approval and will also be there to answer any questions you have about the car loan process.
Contact us today to get started.