If you can pre-qualify for an auto loan before you walk into the dealership, you will be in a better position to negotiate a deal. When you have money in hand, you can usually get a better deal, according to the website CarsDirect.
Significance
Even if you want to get financing through the dealer, you should try to get pre-approved for a car loan through your bank or credit union, recommends Jesse Toprak of Edmunds.com. You can negotiate knowing that you always can go with the bank or credit union if the dealer can't beat your pre-approved loan.
Strategy
You can get an idea if you can pre-qualify for a car loan by looking at your credit report. You can get a free copy of your credit report from each of the three major credit-reporting agencies -- TransUnion, Experian and Equifax -- once every 12 months. Request this through AnnualCreditReport.com. If your score is higher than 720, you likely will qualify, according to CarsDirect.
Considerations
Don't just look at the number on your credit report. Read the information. Many times credit reports contain inaccurate information. If you find any errors on your credit report that makes your score appear lower than it should be, contact the credit bureau in writing, explaining what the error is and requesting that the credit bureau remove it.
Potential
Another way to determine if you can pre-qualify for an auto loan is to use a loan pre-qualification calculator, such as the one on the Bankrate.com website. If you qualify based on the loan calculator, you are not guaranteed a loan, but you can get an idea how good your chances are. Enter information such as your total income after taxes, your total monthly debt, your credit card limit and how many dependents you have.
Types
Besides trying to pre-qualify for an auto loan through your bank or credit union, try using an online lender. Some of these organizations used to loan through car dealers but have since pulled out and started lending directly to consumers. Find online lenders on your own or go to a site such as Edmunds.com to apply with one of its partners.
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