For me, almost anything I can do online is better than doing it in person, and these days, let’s face it, there isn’t much you can’t do online. The trend of online purchasing continues to grow on a yearly basis. After all, you can do it from your home, in your robe if you wish, and you can do it with no pressure. The trend of applying for loans continues to grow also, but that might not be your best bet.
If you have really great credit, say a 720 or above credit score, this article doesn’t really apply to you. You can do as you wish and your issue is not getting your loan approved, it is finding the best possible interest rate. As credit has tightened after the financial collapse of 2008, getting a loan for a car has been tough, especially for those with credit scores below the national average of 680. For those with little or no down payment, or those with negative equity in a trade-in vehicle, it has really been difficult.
When you apply for a loan online, odds are the decision will be made by a computer. There are different models depending on the lender. Some go strictly by credit score, others look at additional criteria such as job time, residence time, income, etc. Still others will match your criteria to loans they have already made to assess the probability of repayment.
When you apply online, where you live can affect your loan approval. For instance, Arizona, Nevada, Texas, and Louisiana have the lowest credit scores in the country, and lenders look at trends, or I should say their computers look at trends.
For those reasons, those with a credit score under the 720 mark or who have unusual circumstances, should apply directly at a dealership for a loan. Generally, dealers actually still speak to the credit source. After all, the dealer has the most interest in getting the loan approved, since no matter how many cars they sell, if the financing is not approved, it is all for nothing.
Dealers also have special relationships, especially with captive lenders like Ally Financial (the former GMAC), Ford Credit, Toyota Credit, etc. This varies from dealer to dealer as to how much clout they have. When I was a Ford dealership owner, we sent everything through Ford Motor Credit. I was loyal to them and in turn, they would approve customers for me whom they would not for other Ford dealers. They told their dealers that if they didn’t support them, as a lender they would not be aggressive with approvals.
It is also important to remember that a captive finance company like Toyota Financial Services and the others are there to support the sale of their products. Hence, more loan approvals mean more sales for the parent company. A captive lender can make or break an auto manufacturer.
The saying “bad things happen to good people” has never been more true. If you have special circumstances as to why you have had credit issues, you for sure need a dealer’s help. Dealers by and large are compassionate people who know if they can help you get a loan, they will have a customer for life. They can effectively relay your story, and that cannot happen if you apply online, the computer doesn’t care about your prior issues.
For some, applying online for a loan makes good sense, but for most, you are better off in the hands of a good dealership.