Bring your own financing
A pre-approval from your bank or credit union sets the rate a dealer has to beat to earn your loan.
When a dealer arranges your loan, they send your application to lenders they work with. A lender approves you at a rate, and the dealer may be allowed to offer you a somewhat higher rate and keep part of the difference for arranging the loan. That's a normal part of the business, and it's one reason financing can be where a deal earns the most.
You don't need to argue about any of that. You just need your own number first. Before you shop, apply for a pre-approval with a credit union or bank. You'll get an APR, a maximum term and a maximum amount, usually with an expiry date. Lock the financing square to it.
Now the conversation is simple. If the dealer can beat your APR on the same term, in writing, take their loan. If not, use yours. Either way, you're choosing the better of two real offers.
Here's what the difference can mean. On $30,000 over 60 months, 6% is about $580 a month and 7.5% is about $601. That's about $21 a month, or about $1,270 over the life of the loan. Across a desk, $21 a month can sound like nothing. Over five years, it adds up.
One caution: compare the same term. A rate quote that sounds better can come attached to a longer loan. Rate, term and amount financed should all match before you call one offer better.
Where it fits in the method
Related in the method
- Get three written offers
- The walk-around appraisal
- Why they go to down payment first
- Loan-to-value and being underwater