Pre-approved Car Loans Best fo Bad Credits

by : Dewey Kearney

It sounds silly, I know. Pre-approved car loans for people whose credit is tanked. But there are several good reasons for pre-approval - especially if your credit isn't that great.
As a car salesperson in Phoenix I dealt with a wide range of people with bad credit. The worst ones were the ones with the sense of "entitlement." Strolling onto a lot as if they were millionaires and picking out a vehicle that was obviously outside their price range based on their credit history and/or their current income.
The second type came on the lot meek and mild and wanted to buy a car "under $5,000" and finance it. They knew they had bad credit and thought they were "thinking like the bank." In other words, lending them just enough to get a car, but not enough for a new or newer model.
Both of these types had the potential to be completely ripped off by the wrong dealership. Why? Because they really had no understanding of how credit and financing works in the car business.
So what are the benefits of getting a pre-approved car loan? How does this benefit you the most?
When you have bad credit often you can't negotiate for the best price on a car. Or pick out the exact car you want for that matter. Why? Because what most people don't know is that when you have bad credit lenders "charge" the dealership a fee for the risk they are taking on you.
What does this mean? The charge is usually a percentage of the car's value - for instance 5%. So if you're buying a $10,000 car and the fee is 5% then that's $500 the dealership WON'T take off the price of the car! Not only that, the $500 is part of the amount you're financing so you are actually paying the bank to assume the loan. I've seen charges as high as $2,000 because of a person's credit!
What's the difference between pre-approved car loans and getting a loan at the dealership? The bank loans you a "fixed amount" of money and it's your job to go out and find the vehicle you want and then negotiate the price down. This guarantees you the best price on the vehicle of your choice because you're not paying the bank to assume the loan.
Getting a pre-approved car loan also means you can pick the vehicle YOU want. On the lot I worked at we often had 3 or 4 vehicles (usually the same models) that we knew would "fit" the banks parameters for people with bad credit. So when a person with bad credit came on the lot we would try to steer them to one of these cars. Not necessarily to make more money in OUR pockets, but because we knew that the buyer had the best chance of getting approved on one of those models because they would fit the banks parameters and had enough markup to absorb the fees without losing money on the vehicle.
Getting a pre-approved car loan also keeps you from looking at vehicles that you won't get financing for. If you are pre-approved for $15,000 then you won't be out looking at vehicles that cost $22,000, wasting your time, and having your credit pulled multiple times by the car dealerships. Once you know how much you're approved for you can find the best vehicle in that price range and negotiate with the dealership for it.
Bottom line - Being pre-approved for car loan a vehicle loan gives you more options and puts you in the drivers seat. You can negotiate for a good car deal and get the vehicle YOU want. So if you're credit challenged and need a vehicle get pre-approved for the loan.