When you're in the market for a new or used car, one of the first decisions you’ll face is whether to secure your car finance before or after choosing a vehicle. While it might seem more convenient to shop for a car first and then worry about the financing, there are several advantages to securing car finance pre-approval before you step foot in the dealership. Understanding the pros and cons of both options can help you make a more informed decision and ensure that you’re getting the best deal.
🏦 Option 1: Securing Car Finance Before Choosing a Car
Getting pre-approved for car finance before choosing your vehicle can give you several advantages when you head to the dealership. Here’s how securing your finance first can benefit you:
Pros of Securing Finance Before Car Shopping:
- Know Your Budget: Getting pre-approval helps you set a clear budget before you start browsing. This means you won’t be tempted to go over your budget or fall in love with a car that’s out of your financial reach.
- Faster Process: Since your finance is already in place, you can skip the lengthy approval process at the dealership. This speeds up the purchase process and helps you avoid any delays or complications.
- Better Negotiating Power: When you have pre-approved financing, you know exactly how much you can afford. This can give you more leverage when negotiating the price of the car since the dealership knows you have the funds already lined up.
- Avoid Pressure: Without financing in place, dealerships may pressure you to sign up for their financing options, which could come with higher interest rates or less favorable terms. By securing finance in advance, you can avoid the pressure and focus on getting the best car deal.
Cons of Securing Finance Before Car Shopping:
- Limited Flexibility: If you choose a car that exceeds the amount you were pre-approved for, you may need to reapply or negotiate the loan terms. While this is possible, it can be an inconvenience.
- Not Always the Best Deal: Some dealerships offer special finance promotions or incentives that might not be available when you’ve already secured financing. If you're committed to a particular loan, you may miss out on these deals.
💡 Tip: Getting pre-approved for finance before choosing your car is ideal if you’re serious about sticking to a budget and want to avoid being swayed by more expensive options at the dealership.
🧑💼 Option 2: Choosing a Car First, Then Securing Finance
On the other hand, some buyers prefer to choose the car first and then secure the finance afterward. This approach allows you to focus on finding the best car for your needs without worrying about the details of financing.
Pros of Choosing a Car First:
- Full Range of Options: Without being limited by the amount of financing pre-approved, you have the freedom to explore all options at the dealership and choose the car that fits your needs, style, and preferences.
- Flexibility with Deals: Many dealerships offer financing incentives or special deals when you purchase a car from them. By waiting until after you've chosen the car, you may be able to take advantage of lower interest rates or cash-back promotions that could make the car more affordable.
- Better Understanding of Loan Terms: Once you've chosen the car, you have a clearer understanding of the loan amount you’ll need, which makes it easier to negotiate with the dealership's finance team.
Cons of Choosing a Car First:
- Higher Pressure: Once you've chosen the car, you may feel pressured to agree to the dealership's financing terms, which may not always be the best deal. Dealerships often offer finance options that include higher rates or add-ons that increase the overall cost of the loan.
- Limited Time for Research: If you're financing through the dealership, you may not have as much time to compare loan options with other lenders, such as banks or online lenders. Without pre-approval, you might not realize you're paying higher interest rates until later in the process.
- Longer Process: Choosing the car first means you’ll have to go through the financing application process at the dealership, which can take more time, especially if you need to provide additional documents or go through multiple approval stages.
💡 Tip: Choosing a car first might work for you if you're not as concerned about sticking to a strict budget or if you’re open to the possibility of dealership financing options. However, it's important to stay cautious of high-pressure sales tactics and interest rates.
🤝 Why Use a Finance Broker?
Regardless of whether you choose to secure finance before or after choosing a car, a finance broker can help streamline the process. Brokers have access to multiple lenders and can help you find the best financing options for your situation, whether you're pre-approved or financing through a dealership.
A broker will:
- Compare loan options to ensure you get the best interest rates.
- Advocate on your behalf to secure better terms, even if you’re applying for financing at the dealership.
- Help you navigate the financing paperwork, ensuring you understand all of the terms and conditions.
💡 Tip: A broker can provide clarity and help you avoid pitfalls when securing financing, ensuring you find the best loan for your needs.
🔑 Final Thoughts
Whether you secure car finance before or after choosing your car depends on your personal preferences and financial situation. Pre-approval gives you more control over your budget and can speed up the process, while choosing your car first allows you to explore all options and take advantage of dealership financing deals.
For the best results, consider working with a finance broker to help you make the right choice and secure the best financing terms, regardless of your approach.
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
