May 27, 2020

What is Auto Loan Pre-Approval and Why Do It?

If you’re considering a new (or used) set of wheels, applying for pre-approval of your auto loan at your credit union or bank first could save you time, headaches, and money. 

What is Auto Pre-Approval?

Getting pre-approved for an auto loan means applying (either online or in-person) for an auto loan with your friendly neighborhood credit union or bank. If you are approved, your financial institution will tell you how much funding you can obtain and the interest rate they are able to offer you based on your application. You will also receive an approval letter which lists these numbers.

Having pre-approval in-hand brings a range of benefits to the smart car shopper, and can save you more than just money.

Pre-Approval Helps You Budget

When you visit a dealer’s lot with the intention of purchasing a car, the dealer will likely ask you how much you’re willing to spend on your vehicle of choice. You may have already worked out your numbers, or, you may only have a vague idea of how much you can realistically afford. Either way, if you don’t have a budget nailed down it’s easier to be talked into spending more than you intended.

Pre-approval, on the other hand, will tell you exactly how much car, truck, or van you can afford, simplifying your search and helping you narrow down options. It can also keep you from getting carried away by the shiny new rides and avoid buyer’s remorse after the fact. There’s no rush and no pressure when you’re working with your own credit union or bank to figure out your budget in advance.

Pre-Approval Helps You Negotiate

When you step on the lot to shop vehicles, having a pre-approval letter in hand can completely change the conversation with sales representatives. With a set number in mind and a rate locked in, you are prepared to negotiate more confidently with less fear of going over budget, and the dealer is limited to showing you options that fit your stated needs.

Pre-Approval Helps You Close the Deal

A pre-approval letter gives you many of the benefits of being a cash buyer. Much like cash in hand, your pre-approval letter shows the dealership you’re serious about buying soon. It’s a strong clue that spending time addressing your needs will be worth their time. You won’t have to worry about balancing monthly payments vs. term lengths in the financing office either—it’s all taken care of by your pre-approval.

What Do I Need for Pre-Approval?

If you’re ready to apply for pre-approval, you just need a few pieces of information on hand. The list is similar for any financial institution, but here’s what you’ll need for pre-approval with Tulsa FCU:

  • Picture of Driver’s License (front & back)
  • Name, Date of Birth, Social Security Number
  • Mailing Address
  • Employer’s Name and Phone Number
  • Employment Start Date
  • Monthly Income

When you’re dealing with a trusted credit union or bank, you’re talking to people who know who you are and what your financial reality looks like. There won’t be any pressure to overspend or stretch your budget beyond your comfort zone. In a relaxed setting you can really think about what you need and what you can afford to make the best decision for you.

If you’re in the market for an auto loan, think about getting pre-approved. Many people who shop for auto loans ahead of time are able to find a lower rate than they would have at the dealership, and the benefits of planning ahead are hard to argue with.

This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.