A bank check auto loan is a form of pre-aproved financing that is being offered by some of the largest national lenders. The most well known player in the market is Capital One, but it is not alone in offering these loans.
How a Blank Check Car Loan Works
With this type of financing, a borrower goes through the application process online, gets pre-approved for a maximum amount, and is then mailed a cashier’s check that does not have an amount filled in. This check can then be taken to a dealership in their area to exchange the check for the new or used car of their choice. Once the price is settled, the dealership fills in the amount and mails the check to the lender for payment. However, this is not really a “blank check” in the normal sense. The lender will establish a maximum allowable loan amount before issuing the check, and the borrower must purchase a vehicle at or beneath this amount. Typically, the check cannot be used at an independent dealer. The dealer must be franchised.
With Capital One, the check can be used for any new car or a used car that is a maximum of seven years old and has less than 70,000 miles on it. The loans are restricted to a minimum of $7,500, but can be up to $25,000 for used or $30,000 for a new vehicle. Other lenders may have different guidelines. The vehicle must always be purchased from a dealership, however. Private party purchases are not allowed, and, as stated above, the dealership may need to be approved by the bank or lender.
Benefits of the Blank Check Option
This type of loan allows you to go to the dealership knowing the maximum you can afford. This allows you to negotiate more strongly on the most important issue…total price. Additionally, you will know your exact interest rate, so you can accurately estimate you monthly payment. One other advantage is that you do not have to cash the check. If you cannot find the car you want at any of the captive dealerships in your area, just let the check expire. Since the loan is not officially ”made” until the check is signed and returned, you have lost nothing.