There is a lot to take into consideration when shopping for a car including the car’s make, model, trim level, and price. However, figuring out how you’re going to pay for that car is equally as important. According to a recent survey from CarGurus, pre-qualifying for an auto loan can give car shoppers more confidence before stepping into a dealership showroom as they feel better prepared to purchase a car by doing so.
What does it mean to pre-qualify for an auto loan?
When you pre-qualify for an auto loan, that means that you have checked what you could possibly qualify for when applying for an auto loan. Have you ever received a letter in the mail from a lender or your bank telling your that you’re “pre-qualified” for a loan? If so, those are typically just ads to get you to actually apply for a loan, however, your actual loan rates might vary depending on your credit approval.
According to Credit Karma, pre-qualifying for a loan doesn’t mean that you’re tied to one lender either. Instead, pre-qualifying with different lenders will allow you to shop between different loan rates and pick the best one before heading into a dealership.
The CarGurus study shows that pre-qualifying for an auto loan is important
CarGurus recently conducted a study in which it surveyed 754 car shoppers asking them various questions surrounding auto financing and the car shopping process. According to the study, 93% of car shoppers find that pre-qualifying for an auto loan before setting out to find a car is helpful. However, only two out of three shoppers even knew it was possible to pre-qualify for a loan, and of those that recently financed a vehicle, only half of them pre-qualified for the loan.
Pre-qualifying for an auto loan can give buyers more confidence throughout the shopping process since they will be more aware of their financing rates going into it. The study also revealed that 42% of shoppers wished that they could see their monthly payments online and before actually going to the dealership.
“Our research found that consumers are eager to purchase a vehicle in a similar fashion to buying a home, and they want to know more about financing for this major purchase in advance instead of treating it as an afterthought. According to the study, there is also a lot of room to educate consumers on the general ideas around automotive finance, which should ultimately provide a better shopping experience for both consumers and dealerships.”Madison Gross, Director of Customer Insights at CarGurus
Pre-qualifying for an auto loan can be empowering
Now that you’re familiar with what pre-qualifying for an auto loan is and how it can be useful, it’s also important to keep in mind what a powerful tool it can be during the car-shopping process. Lending Tree advises that by pre-qualifying for a loan, you’ll be better able to decline a lot of the dealer add-ons like extended warranties, GAP insurance, and other products since you’ll essentially be a cash buyer by bringing in your own loan terms.
Ultimately, this also means that you’ll be spending less money on the car that you want and even saving a lot of time in the process.