Skip nav to main content.

Why — and How — to Get Preapproved for an Auto or RV Loan

  • April 19, 2019

Before you go shopping, make time to get preapproved for an auto or RV loan. In addition to helping you secure the best interest rate possible, preapproval gives you leverage at the dealership and peace of mind about your purchase.

It’s easy to get preapproved for a loan with Astera Credit Union before you head to the dealership. Here’s why you should and how to get started.

Set a realistic budget

Getting preapproved for a loan helps you set a realistic budget for your purchase since you know how much you can borrow and at what interest rate.

Your purchase price should be less than what you’re actually approved for because you’ll need to reserve about 10% of the loan amount for taxes and fees. You’ll also want to consider down payment and trade-in amounts that offset the purchase price.

With all of this information, use a loan calculator to estimate your monthly payment. You can then make sure your payment will fit into your budget, and if it doesn’t, you can look for a less expensive purchase. And don’t forget, your total expenses — including things like insurance, gas and maintenance — will be more than just your loan payment.

Get protection from dealer markups

Dealer financing is convenient, but if you haven’t shopped around, a dealership finance manager might try to take advantage of that and mark up your interest rate. That could mean you’re paying 1 or 2 percentage points more than you should, which can add up to hundreds of dollars over the life of your loan.

By getting preapproved, you’ll know you’ve gotten the best interest rate you can qualify for and be able to judge if the dealer is offering you a good deal.

Strengthen your negotiating position

With your lender-approved blank check or certificate in hand, you’re transformed into a “cash buyer,” at the lot, and you’re in a much stronger negotiating position.

Without preapproval, here’s how the price negotiation game is played:

The smiling salesman asks, “So, what monthly payment are you looking for?”

By negotiating the monthly payment, the finance manager can inflate, or “pack,” the payment with charges or fees that often have little relationship to the price.

But if you get preapproved financing, you can avoid this sales tactic.

You can smile right back and say, “I’m a cash buyer. Let’s just talk about the price of the vehicle.”

Written by: NerdWallet

Leave a Comment

For security, use of Google's reCAPTCHA service is required which is subject to the Google Privacy Policy and Terms of Use.