My personal, and probably naive, grudge against pre-approved car loans.
A few months ago I took a long hard look at my 2000 Honda Accord.
She was a pack mule. A pack mule I had come to love dearly. She drove me back and forth between Arizona and San Diego countless times and even got me all the way out to Indiana.
That first Indiana winter though was not kind to her (or to me for that matter!).
So when spring came around, I realized I had two options:
- Dump a couple thousand into a 19-year-old car to make it last another winter, or
- Finance a new car and not worry about reliability
If I had still been living on my own in Indiana, I probably would have kept my old car until it literally died on me. But, alas, my husband cares about my safety and relies on me getting to and from home/work safely.
I went back and forth on different models, but once I nailed it down, we went to the dealership to test drive and ‘plant the seed’ with the salesman.
I am proud to say we did not walk out with a new car that day!
We test drove it, announced price is the biggest issue, negotiated with the salesman, then left when we knew we wouldn’t get what we wanted. Go us for not falling for the sales scheme!
Then we went to the bank…
Honestly, it was super easy getting pre-approved. A couple of credit checks later and we were pre-approved for a loan at an excellent interest rate.
The problem was actually when we went back to the dealer and negotiated the price down more than we were expecting. Which, I know, is a good thing. But this lower price changed the terms enough on the loan that it caused the interest rate to spike!
I was devastated when they came out and showed me the new terms. Then they ran our credit SEVEN more times to find a rate that was closer to what we were promised by our bank.
The final loan interest rate was very similar to the original pre-approved rate, slightly higher, but within reason. The thing that really got to me though, was that we had no relationship with this new bank.
This new-to-us bank gave us a loan with very fair rates while our bank, where we have several checking, credit, and savings accounts, tried to screw us into a higher rate.
Maybe this is my naivety showing (this is my first time actually buying a car after all), but I was left with quite a sour taste in my mouth.
The sour tasted a lot to me like they tried to take our negotiating power away.
This was one of the first questions we asked our banker when we got pre-approved: Will getting pre-approval prevent us from negotiating lower than what we get approved for?
I know the answer to that is truly ‘no’, but in my position, it definitely felt like my bank did not want me to negotiate once I got the pre-approval.
The dealership financing specialists, whom I was prepared to thoroughly dislike, turned out to be the most helpful. They explained to me in excruciating detail why this tends to happen and how there’s nothing they can do about it.
The offered to check our credit against several other loan providers they were partnered with and did eventually find us a good rate. Only after seven additional credit checks, though.
Now I have seven more hard credit inquiries on my credit report for the next few years and only 1 car to show for it. I know hard checks aren’t weighed that heavily, but I see them every time I check my FICO and it bugs me every time.
My bank actually sent me notifications about the multiple credit checks to make sure I authorized them and they weren’t fraudulent.
I can appreciate the irony, but dang it all boils my blood.
Maybe my grudge should be held specifically against my bank, or maybe even the car-buying industry in general, but today, in my anger, I blame the pre-approval for pushing me nearly to tears when I bought my brand new car.
They took the power I thought I had and placed it right back into their deep, money-hoarding pockets. Ugh!