Unless you are paying cash, you will need to get approved for an auto loan for your new car. Fortunately, most reputable car dealerships have an in-house financing department that is there to meet your needs. You may notice a few key differences between getting a loan through a dealer and getting one through a bank. The following can answer some of your questions on the process.
Why does the dealer want the loan paperwork filed before you have even looked at a car?
There are several reasons for this. First and foremost, the dealer uses the credit report as a tool to help narrow down which cars best fit your income and payment needs. It is much easier when a dealer knows from the outset what the buyer can afford. It also helps protect the assets and time of the dealership, since only serious buyers are likely to agree to a credit check from the outset.
Do you have to agree to the credit check?
Not unless you are ready to discuss financing. If you are unsure if you are ready to buy from a particular dealer just yet, you may want to hold off on running a report. This is because your credit score drops a small amount for each time it is pulled. If it is pulled too much in a short time, it could affect your ability to get financing. Let the dealer know you are still in the initial shopping phase and let them know why you prefer to wait for a credit check.
What if you don't plan to use dealer financing?
A dealer may sometimes request a credit check even if you are bringing your own financing to the table, or if you are planning to pay cash. This is because they are required to verify your identity before selling a car. A credit check is simply an easy way for them to complete this requirement and ensure that you are who you say your are. You can refuse this credit check and ask for them to verify your identity via your ID or other information. Keep in mind, this may delay the purchase if it is after hours or the weekend, since alternate checks may require the dealership to contact your bank.
Talk to a local dealership or a credit checking company to find out the answers to any further questions you may have about the auto financing process. Contact a business that offers credit reports for auto dealers for more information.