From the time you decide to start searching for a car to the time you drive your car home, it takes the average Canadian car buyer nearly three months to find the right vehicle. That includes hours of online research and multiple visits to dealerships and banks. According to buyers, one of the most stressful parts of buying a car was arranging the financing. A car loan pre-approval makes this entire experience a lot more efficient…
Picture this: You’ve fallen in love with a new vehicle, and settled on the price- only to find that credit is just so-so or your income doesn’t quite support the loan value, so you’re waiting for the dealership to get you approved. Unfortunately, this is what happens to so many Canadian buyers. At VIDrives we know there’s no worse feeling than having your heart set on a car and getting a negative answer.
In 2022, car shoppers don’t have to go through that cat-and-mouse of waiting and being disappointed. Automotive pre-approvals have changed the game for car buyers. Not only does a pre-approval reduce (or completely eliminate) the time you have to spend at the car dealership, but it empowers you to shop for your new car more confidently, and even save you money.
How does a car loan pre-approval work?
According to data analytics firm FICO, two out of every three Canadian car buyers look for financing when they’re vehicle shopping at a car dealership. For those who plan to take advantage of financing options, A car loan pre-approval is simply preparing for the process before settling on the vehicle or setting foot in the showroom.
The loan pre-approval process is more specific than just asking, “How much car can I afford?” Instead you’re saying, “I’m going to be looking for a new vehicle. What terms am I approved for so I can select a vehicle?” In that way, your pre-approval gets you much closer to taking a vehicle home- because it helps narrow down your search.
A pre-approval application is completed at home, typically online, and all the same steps of a car loan application are taken. Income is verified along with your credit score and debt-to-service ratio. Then, the lender delivers the estimated loan terms that you can use to make your vehicle selection. Typically this will include the total loan value, monthly or bi-weekly payment amount, loan term, and an estimated interest rate.
That’s great to know, but what are the benefits of being pre-approved for a car loan?
4 benefits to getting a pre-approval for your next car
1. It focuses your attention on the right vehicles
If you want to avoid the phone call saying, “you’ve been approved, but” then getting pre-approved is a good idea. If you don’t have the income to support the car you’ve chosen, and need to provide a bigger down payment. If you don’t have that, that means the car you’ve got your heart set on is out of reach. Without a strong credit history- you might not get approved at all.
When you get a pre-approval you can more accurately shop for a vehicle. You’ll know up front the total price, your expected payment and where your interest rate should be. This helps you shop within your actual budget, or allows you time to save up for a down payment if you want something more expensive.
2. It gives you access to the best available financing rates
One of the most beneficial aspects of pre-approval is that it arms you with knowledge. When you know the interest rate you’ve been pre-approved for- you can shop more intelligently.
For example, if a flawed credit history means that you’ve been pre-approved on a 60-month term. You’ve selected the perfect Truck for your needs and budget and you know what your interest rate will be. The Finance Manager might ask “would you like to go forward with your pre-approved financing, or I can see if I can get you a better rate?” You can say yes, and have the chance to get an even better deal- because with a pre-approval you aren’t locked into the deal until you’ve signed on the dotted line. Whether the Finance Manager comes back with a lower interest rate or not, you can be confident that you’ll be driving home in your new ride- with no unexpected surprises.
3. It speeds up the process
Patience is a virtue, but it isn’t one you should have to practice in the waiting area of a dealership when you’re ready to make a big and exciting purchase. If you decide against a pre-approval and walk straight onto a car lot, it’s going to take hours or even days longer before you finally take your vehicle home. After you fill out an application and head to the finance office, the approval process can take a very long time.
The finance manager may need to call a few lenders to clarify conditional approvals while others will require documentation that might take you time- and trips to the bank to get your hands on. Getting approved instantly isn’t the norm, especially if you don’t have perfect credit.
Armed with your pre-approval- you can usually expect to be driving your car home within a day- even the same day. No need to jump through hoops- because you’ve organized it all ahead of time.
4. It can help you get approved, even with bad credit
Getting pre-approved for a car loan is a great idea for anybody, but especially for those with no credit or bad credit. While traditional dealerships have access to low or zero interest loans from the manufacturer, they aren’t always equipped to help buyers with bad-or no credit. Getting pre-approved provides you with the best rates and terms for your specific credit situation- before you even step onto a car lot.
How can I get pre-approved?
VIDrives can help you get pre-approved (with no obligation) online, so you know exactly how much financing you can get before you start car shopping.
It only takes three minutes and works with all credit situations (including bad credit). This credit check will not harm your credit score, and you don’t need to do anything with the approval terms we send you.
