The advantages of getting pre-approved for an auto loan

The advantages of getting pre-approved for an auto loanThough getting a new car and a financing plan from the dealership all at once may sound convenient, such a deal may actually hurt a driver's wallet and cause more confusion than necessary.

While online car loan providers give borrowers an interest rate quote that corresponds directly to their credit score, dealerships may add a point or two because they think the driver is likely to accept the deal anyway, according to Philip Reed, senior consumer advice editor at Edmunds.com.

Going to the dealership with a pre-approved auto loan may put a limit on how much a dealership can charge the driver. Furthermore, it allows the driver to negotiate from the strong position of a cash buyer. Instead of negotiating over monthly payments – a tactic that sometimes allows dealerships to overcharge – consumers can directly bargain over the total price of the car. Such a negotiating procedure may be more straightforward and may allow the driver to avoid purchasing add-ons he doesn't want or need.

Credit has slowly been expanding in recent months, even for drivers with bad credit history, and those in the market for a new or used car may want to research their car finance options before entering the dealership.