If our constant reminders to always line up your financing before heading to the dealership haven’t sunk in yet, perhaps knowing that preapproval from a particular lender can shorten the overall process will grab your attention.
Some lenders, such as Bank of America, have a special relationship with certain new-car dealers, cutting through much of the red tape when closing the deal on a vehicle. The buyer will save time by avoiding the hassle of trying to secure a loan on the fly during the process of buying a car, and the special relationship between the lender and Bank of America’s preferred dealers smooths out the wrinkles when moving the paperwork along.
The only time you should wait to arrange financing until you have settled on the car and are sitting in the dealership’s business office is when you’re trying to take advantage of one of those no- or low-interest loans offered by a carmaker’s credit subsidiary, such as Ford Motor Credit Company or Honda Financial Services. Otherwise, don’t count on a car dealer to find you the best financing deal. Car dealers are in business to make money, and they’ll often boost the interest rate as compensation for arranging the loan. It’s all aboveboard and legal, but why pay the dealer to do something you’re perfectly capable of managing on your own?
Finding the best deal on the price of a car requires research and negotiation, and securing the best interest rate means knowing the lowest rate for which you qualify and shopping around until you get it. There is no opportunity to do so when you’re sitting in a car dealership’s business office. You could fire up your iPhone or tablet, but you’d just make the whole process longer.
Bank of America’s Program
According to Duane Freeman, who works in consumer and commercial lending in the automotive sector for Bank of America, there are roughly 13,000 new-car dealerships across the United States. Some offer multiple brands under one roof. Of those 13,000 dealerships, about 7,300 are preferred dealers with the bank. The bank reached out to these dealers and established a special bridge of communication and trust. These are dealers the bank feels good enough about to recommend them to customers. Many credit unions, such as Campus Federal in Louisiana, My Community in Texas and the American Airlines Federal Credit Union have similar programs.
Freeman stressed that, when a Bank of America customer applies for a loan before heading to the dealership, the approval he receives is not a preapproval hanging on the car eventually purchased. Instead, the preapproval is a rock-solid approval based on the customer’s own creditworthiness. Because the customer is approved for a specific amount regardless of the vehicle purchased, the paperwork with a preferred dealer is streamlined, requiring fewer i’s to dot and t’s to cross. “It really depends on the dealer involved,” Freeman said, “but we like to think it shortens the process.”
What it means to you: Since there is plenty of uncertainty when buying a car, you can never do too much research. Getting approved before heading to the dealership is a real stress reducer. Working with a lender who takes an extra step to make the process easier and simpler makes sense to us.