Have you ever been in a vast artisanal vegetable marketplace with tons of alternatives and sellers offering "deals" while you shop around? Well, while it may work well for multiple kinds of businesses and also for the customer itself, it is not a good idea for getting a new car. Remember: all new cars from the same model are the same and have the same price. It is the same product everywhere, but I will talk today why it is not a good idea to go dealer by dealer shopping around.
The Best Deal You Can Get
When you are looking for a good deal, you are looking for a good deal. This means that dealerships will be ready to offer you the best if you show real interest in it. If you go to a dealer, take a test drive and leave without showing any interest in signing, you won't get as good numbers as if you actually were ready to.
So, when you sign and accept a deal + a Credit Check, you are confirming your will to go ahead with a deal that now will be subject to a Credit Report analysis. Credit Report that will validate or modify the conditions, according to the bank itself. And up to this point, your deal hasn't been finalized yet.
After "your Credit" is analyzed, the dealership financist will call you back with one of the following follow-ups:
- "Yes, we can go ahead with what we talked about. The bank has approved the loan." Which will mean you need to set up an appointment for delivery.
- "Your Credit Score is not enough, but it is fair. Do you have a co-signer?" That will likely be your partner, parent or even an interested employer.
- "Your Credit Score is too low; you need to do a downpayment that will be deducted or either take a higher interest rate." So you will need to study further options.
Obviously, any of the two-second cases have a chance of taking you out of the deal. This means that the deal you initially got, has now the missing part to complete it: how likely are you to accomplish it.
All Credit Inquiries Remain Recorded on Your File
Like in the previous case, each time you apply for a loan, a mortgage or even are interested to rent an apartment through a recognized Real Estate agency, you have to go through a Credit Check. Each one of these, and always after your knowledge and authorization, will check your financial background, also known as Credit History.
Your Credit History will tell them how likely will you be to accomplish your financial responsibilities. And running a Credit Inquiry also is part of your financial history.
For a Loan Creditor, a person with multiple Credit Inquiries (although all registered by Credit Bureaus with a detailed label of the Inquirer) is "riskier" than one with less or none. In fact, each inquiry on your file affects your Credit Score. This means that if you were "shopping" around in multiple dealerships, it would be registered on your Credit Report and that will be a red flag for everyone.
Know Your Credit Score First, Negotiate Then
As your Credit Score is part of the negotiation itself, if you don't know if beforehand, then how do you know you will apply for the best rates when going after a deal? You need to know that specific part of the deal that is completely on your side.
So, going back to the basics: All offers that manufacturers, groups, and dealers advertise are subject to a Credit verification by the financing entity that will help you acquire the vehicle. You will be able to get those deals only if you actually come up to the table with a good Credit Score.
So then, your opening with your bank/dealer should start by "Hey, I have 730 of Credit Score, and I want this deal. Can we do it?" And then you will be closer to the reality, although the bank will have the final say, chances are way more now under your control.
If Your Credit is Low, Start Building It Up Now
If you have a low credit, yes, for sure you will be able to get the car you want, but the alternatives that will be available for you won't be the best ones. Prepare for higher interest rates, bigger down payments (usually 30% to 40% of the MSRP of the vehicle) making "not too fun" the fact of acquiring a new car.
This is why you should start rebuilding your credit right now. One of the best alternatives available in Canada so far is going to Refresh Financial Credit Build Program.