Why is it important to shop for car loans before visiting a dealership?

Shopping for car loans before visiting a dealership is important because dealers may manipulate loan rates. When you compare loan options from various lenders, you gain a clear understanding of the interest rates and terms available in the market. This knowledge empowers you to negotiate effectively with the dealership and helps you identify whether the financing options they offer are competitive.

Dealers often have the ability to mark up interest rates, which can significantly increase the overall cost of the loan over time. By having pre-approved financing from banks or credit unions, you can hold dealers accountable and ensure that you secure the best possible deal for your situation. This practice not only protects you from potential overpricing but also gives you a valuable reference point during negotiations.

However, it's important to be aware that some choices in the question may mislead consumers regarding car financing. For instance, manufacturers do not generally dictate loan rates directly unless they are running special promotional financing offers. Financing at a dealership is not illegal, and many people successfully go through dealerships for financing options, but being informed and vigilant about rates is crucial in making the best financial decision.