One of the most difficult parts of the car buying process is trying to secure a firm quote on financing. Many banks won't give a firm rate until you've chosen a car, or their limit on the loan amount may change depending on the year and model of the car. Capital One's Blank Check Program has become very popular because it allows you to go into the dealer with a firm quote in hand. Here's how the process works and how to use it to your advantage.
The initial application process is a simple online form. Enter your personal information including income and social security number. Many buyers will receive an instant decision, but applications requiring further manual review may take a few days. You may be asked to faxed in additional documents such as pay stubs.
Capital One's approval is for a fixed amount. The rates are also fixed, but you are given several rates based on the year of the car. Once approved, you receive a blank check that you can take to the dealer and use just like any other check. The check is valid up to the lesser of your approval amount or 110 percent of the car's book trade-in value.
Shopping for a Car
If you're approved for a blank check, you now know you're definitely approved for an auto loan and don't have to worry about that going into negotiations at the dealership. Since you're now just concerned about the selling price of the car, the dealer can't play hide the ball by trying to negotiate based on monthly payments, the loan length, or the interest rate. All you have to do is negotiate for the best price. You have to shop at approved dealers, but the list is very broad in most areas.
Financing Your Car
Once you have a firm price negotiated, give the dealer the opportunity to beat the terms of your blank check. Dealers receive incentives from their banks for each loan signed with them, so they will be more than willing to try. If they give you a better rate, take their offer. Just be sure to check the fine print for any unfavorable terms such as early repayment penalties. Also carefully read the terms of your contract to ensure that the loan offer is final -- many dealers will have customers sign when the bank hasn't given final approval and then tell the customer the bank didn't approve them and they need to either return the car or agree to a higher interest rate.
What Else to Watch Out For
Because dealers get incentives for signing customers up for their financing, they'll push you towards their financing companies. If they tell you they won't take a blank check, call Capital One to confirm -- reports of dealers either lying or not understanding the process are common.
Also be sure of what you're negotiating -- many dealers offer discounted pricing with the catch that you use their financing. Be firm that you want a cash out the door selling price first. If the dealer wants to offer, for example, $500 off for financing with them, tell them you're open to it but still make sure you're clear on the actual selling price. When the numbers are finalized, simply take out your calculator, figure out which deal is best for you, and take it.
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