A pre-approval doesn't mean you are approved for anything. It means you still have to take the printout to the dealer and finalize it there.
Finalize meaning prove you have an income. Tell the bank what the proposal really is. Those finance guesstimaters don't tend to take in all the dealership finance room nonsense, taxes, and mystery fees, and (my favorite), the "documentation fee" where they charge you $1,500 for a license plate.
Finance room nonsense (fees, extended warranties, paint protection package) is how they draw you onto the lot to look at a $24,000 entry level car and it turns into $32,000 in principle at 10.39% APR= $8,591 of interest, and now you have a $40,591 car loan at $643 a month for five years when it started out sounding so reasonable.
So you have people sign it and then a year or two in they really can't afford it. I mean, think about it. They couldn't pay for the car because they had no money but now they're going to pay for the car and $8,600 in interest as well....and the bank takes it while they're filing for bankruptcy, and then sells it to someone else.
Financing doesn't make things affordable. It prolongs the agony.
I don't recommend Capital One if you haven't shopped around and figured out whether they're the cheaper APR or not or even if anyone else will do business with you.
They offered me 10.39% the other day with FICOs in the high 600s, and other institutions have offered me less than that.
Capital One is better than Sammy the Shark's Buy Here Pay Weekly, but that ain't saying much. Lol
They mostly deal with subprime loans, and you'd be amazed how much just a point or two higher can add up, and there's actually people out there who don't think about it and agree to even more than 10.39%, which is terrible even in this interest rate environment.
Discover offered us a personal loan then other day that wouldn't even be attached to the car title as a lien, and they came at us with 8.99%.
I'd do that before I'd take the Capital One offer.
I think most of us can agree that a car is a "major purchase".
Why wouldn't you finance at the lower rate without the lien if those are the options like they would be for me? If anything happens later, they can't get out there and haul your car away in a month or two and leave you with no ride to work so you can even try to pay them. Also, when you have a lien it becomes harder to sell the vehicle later and come up with the difference if you have to get rid of it and pay the bank back and get the car off your hands. If problems arise, they can still sue over an unsecured loan and attempt to put a lien on the car, but with Capital One, I'd be offering them another 1.4% so that they'd already have a lien to begin with. That's just starting yourself off with the worst possible outcome. They charge you more regardless, but if push comes to shove they'll have your car in a couple of months with the auto loan.
Not having a lien means that if unexpected problems crop up in your life years into the loan, you have more time and options to head off trouble that could cause you to lose your transportation. You should always follow the rules of the personal loan. Many allow you to buy a car! But some don't. Always be honest in your loan paperwork.
Of course, no lender is ever going to tell you why a personal loan may be a better way to finance a vehicle because they don't want to go through a rigamarole in court over your life issues to attach to something. But the fact is, it puts some more power in your hands if the worst happens.
It can also be a problem when you move to another state that does their DMV differently and you have to deal with an unresponsive finance company and potentially have issues plating the car. (Ran into this one with Kia Finance once.)
(People get personal loans for all sorts of reasons that are clearly less responsible than financing a car. They get them for plastic surgery, and to finance a $20,000 wedding that comes 14 months before a divorce, or an expensive vacation they have no money for. I hardly think that getting a reasonable amount to help you finish up paying for a vehicle is an obscenity, and again, many lenders allow vehicle purchases.)
Realize that Capital One pays dealers to put that pre-approval tool on their site. They aren't doing it for free.
If you can putter along in whatever you drive now for another six months to a year and make it work, interest rates are expected to fall.
If you sign now you get what you get and you may be stuck with it for years. Perhaps even through unemployment or a major illness.
Also the longer you put it off and save, the bigger your down payment will be when you get there and the lower your APR and car payment.
Banks like to see skin in the game, and dealership salesmen know how much they can pack into the loan exceeding the car's value and still not get the loan denied.
They do it to people everyday with overpriced GAP insurance you can get through car insurance as "loan payoff" or "better car replacement" riders, and paint and puncture packages and extended warranties from who knows where.
If you let them, a salesman knows how to make your down payment completely disappear into finance room nonsense and still get you a loan that exceeds the vehicle value by 20%.
All too often, a sad customer pulls into a muffler shop with a "car warranty" they financed that did nothing except make their loan bigger and now they have no money to fix their broken car.
It's called being double broke.
They're not going to leave the car on their lot for 14 days while they have problems getting a hold of the car warranty people or having them deny coverage or make nuisance demands on the shop manager when the shop manager has people who pay cash who want it fixed and out of the shop.
So if you don't watch what the dealership does to you, the interest rate on the loan will be the least of your problems. They can pack so many things in there that it's loaded to the brim with stuff that's not "the car" and then you'll pay interest on that too. You'll get home and your head will be spinning wondering how they got any of that past you or what it even is.
