Surprisingly, there are still many car shoppers in Oklahoma City that haven’t obtained financing through the dealer. If you are one of them, read on to know what you should expect when you apply for an auto loan at the dealership.
Applying for Credit
You will be asked by the manager of the dealer’s Finance and Insurance (F&I) Department to fill out an application form. You are required to provide the following information:
-Date of birth
-Social Security number
-Current and previous address/es & length of stay
-Current and previous employer/s & length of employment
-Total gross monthly income
-Source of income
-Financial information (i.e. credit card accounts, existing debts, etc.)
In relation to the last entry on the list, most dealerships will pull a copy of a loan applicant’s credit report to find out more about his/her credit obligations. They are interested to see a customer’s record of borrowing and repayment not only to find the right lender but also to determine if the individual is eligible for financing in the first place.
After you complete the application form, the dealership will send your application to a number of its partner lenders. All dealerships maintain a network of lenders like banks, credit unions and finance companies. These lenders buy the contract from the dealer and fund the purchase.
Lenders will decide whether or not to buy your contract based on what is indicated in your credit application. Potential assignees, as what such lenders are called, assess your application based on your completed application form, credit report and credit score—the three-digit number that represents your creditworthiness. They also take into consideration the terms of the sale, including the amount of down payment offered.
Negotiating the APR
When a potential lender agrees to buy your contract, it will inform the dealership of its decision. In most cases, the lender will offer the dealer the buy rate, also known as the wholesale rate. It is the rate at which the lender is willing to buy the contract.
When buying a car, you know you should negotiate its price. When you finance the purchase through the dealer, you must also negotiate, this time for the annual percentage rate (APR). The APR you will get will be much higher than the buy rate; the dealer will increase the rate to include compensation for arranging the financing. Many dealers significantly mark up the rates, causing consumers to pay more than they should. Hence, it is important to negotiate the APR so you don’t overspend on the purchase.
Getting a Manufacturer-Sponsored Discount
When you obtain financing through the dealer, you may be eligible for manufacturer incentives. You may qualify for zero or low-rate financing, rebates, or cash back offers. Automakers usually have such offers to help dealers sell their vehicles. Unlike the vehicle’s purchase price and your APR, the aforementioned offers are non-negotiable. While you can ask about special programs when you are already at the dealership, it would be a good idea to research about such programs offered in your area beforehand. Special programs can save you some money on your purchase.