Please note that the key word here is "shopping". Going “shopping” doesn’t mean that you would go to your financial institution and apply for a loan. In fact, dictionary.com’s meaning for the word “shopping” is as follows:
v. shopped, shop·ping, shops v. intr.
- To visit stores in search of merchandise or bargains.
- To look for something with the intention of acquiring it.
In order to consider yourself in the “Car Loan Shopping” process, you need to be “looking at options- more than one item of interest”. It’s the exact same process as when you are shopping for the car itself. You wouldn’t buy the first car you see; you’d look at and even test drive others, whether they are similar or not, to find the best value for your money.
You can start at your local financial institution, but be sure to make them aware that you are merely “getting quotes” and “shopping around” for the best deal. This will make it easier for you (and them) if you end up signing a loan agreement with a competitor.
The Internet and Car Loan Shopping
Just like with everything else that you can do online, “fill out one simple form and get five different quotes from five competing lenders!” is the latest craze in the growing auto lending industry. Competing lenders will, of course, fight for your business and you’ll get the best possible offer. Many of these lenders will “pre-approve” you for a certain dollar amount, leaving you with little to do except find your ideal new vehicle.
Of course, many lenders will require you to have a certain amount of equity in your vehicle to grant you the best rates and programs. This is just in case you default on your loan (the bank wants to be sure they can recoup any losses that they incur). You can obtain equity in your vehicle in a number of ways:
- Use a cash down payment.
- Trade in a vehicle which you own completely, with no lien from a financial institution.
- Purchase a vehicle that is worth a significant amount (20%) more than you pay for it.
Both of the first two items on this list are relatively straight forward, but the third one can be a bit tricky. You probably can’t trust the salesperson selling you the vehicle to let you know what it’s really worth, because their salary is based on commission. So who should you trust?
Edmunds.com is one of the most reliable sources for getting a genuine value of a used (or brand new) vehicle on the internet today. This site explains in detail the innermost dealings of automotive industry, teaching you how to get the best deal on your vehicle of choice, new or used, no matter where you purchase it. They even have a “auto value estimator” right online for you to tally up the true, estimated worth of your new vehicle of choice.
