Car shopping can be an emotional process. That can make it easy to get swayed by a vehicle that is outside your budget or not suited for your needs.
Before you go to a dealership, get preapproved with a traditional lender, such as a bank or credit union. This will give you an interest rate and loan terms that allow for apples-to-apples comparisons.
Know What You Want
Whether you're buying a new car or replacing an old one, it pays to know what you want before you walk onto a dealer lot. Then you can clearly communicate your creditworthiness to salespeople and avoid being pressured into a car you may not need or can afford.
Get the Facts on Bank-Owned Vehicles
Especially with repossessed vehicles, you should approach them analytically instead of emotionally. Falling in love with a repo car can cloud your judgment and make you willing to overlook problems or exceed your budget. It's also helpful to have preapproval from lenders so you can clearly demonstrate how much you're qualified to borrow, which will make it harder for salespeople to push you toward expensive models. This can help you negotiate better prices and terms, too. You can apply for preapproval online or through traditional lenders, including credit unions. Some auto manufacturers also serve as lenders and offer special financing options for their buyers. These lenders can usually provide you with an estimate within a few days, and they'll only do a hard inquiry once to obtain your credit score.
Get a Good Deal
Many lenders make their repossessed cars directly available to the public in an effort to quickly offset their loan loss. This can provide some excellent deals for buyers.
The downside is that the lenders do not always clean or repair these vehicles before selling them. You will need to be prepared to put in some work and money to get your car road-ready. It is also a good idea to bring someone who knows cars to inspect the vehicle for you.
When you purchase a repo, the bank will send you what is called a “clean title.” Once you have this in your possession, you will need to go to the DMV and transfer it into your name.
Another advantage of getting preapproval is that you will have an accurate idea of your maximum financing amount before you ever set foot in a dealership. This can save you both time and money when it comes to negotiating with dealers.
