Most car buyers are not able to pay for their vehicles in cash. 90 percent of all car buyers must finance their purchases. Customers usually check with their bank loan officers first, so it's important to understand the bank’s car loan process.

First, banks fret over security and ensuring that loans are repaid, repaid profitably, and that a borrower doesn't disappear with the bank’s vehicle before the loan is paid.

Second, banks yearn to grant loans. It's how they make money. If they only took deposits, and did not invest what they receive in houses, cars and other objects, they would quickly go broke.

Third, banks structure their sales staff (loan officers and behind-the-scenes employees who spend their entire days approving loan applications). These people receive no benefits other than a pat on the back for establishing a loan. They do not earn a commission as other salespeople do.

Although the bankers clear no commission for making profitable loans, if the loan sours, they have some serious explaining to do. If a large number of their loans default, they risk being fired.

Fourth, the people who make the decision about the loan never see the loan consumer. The impression you make with the loan officer is not that important, since he is not the person who approves the loan. However, if you do not make a good impression on the loan officer, you will never make it to the approval headquarters.

Here is how a typical loan is processed:

• The bank loan officer speaks with the customer, pre-qualifies him, helps him fill out the application, and then ships it back to headquarters for approval.
• Headquarters approves or denies the loan based on the application and on their own internal factors, and ships the results back to the bank loan officer. The application is vital because the person who processes the loan will not see the customer or know his attributes, and will only go by the hard monetary facts, such as that person’s credit history.
• The branch bank loan officer can overrule a central bank denial of an application. This override ability seems to fluctuate with the economy and does not happen very often. But the fact that it is possible should stress the importance of impressing your banker favorably.
• Loans can be processed on an emergency basis within 8 hours. Routine approvals are done in two to three days. If your bank tells you it will take three to four weeks, ask why and either check with another bank or threaten to do so.
• For new car loans, many banks are currently lending 80 percent of selling price, and up to 100 percent of wholesale Blue Book price for used cars. Obviously this can change depending of economic conditions. The right bank may even loan for tax and license for used vehicles.

Bankers are not paid to be imaginative and inventive. They are paid to evaluate elements only on a conservative, conventional and financial basis. So, how do they evaluate a car conventionally and financially? They base the loan on the price of the new or used vehicle as defined by the manufacturer (list price), the selling agency (dealership) or a recognized used car expert (Blue Book).

This can cause problems. For example, Blue Book only provides estimates on used vehicles. The Blue Book and others like it will never show all the factors that can influence the car’s price, including regional preferences, seasonal differences, the effect of the paint color, or interior condition.

The Blue Book gives wholesale values based on clean vehicles fully reconditioned and ready for resale with acceptable mileage. It defines suggestive retail vales as an estimated dealer asking price, with the actual selling price varying substantially. It also indicates that the condition of a car is of prime importance. Appropriate amounts are added for exceptionally clean vehicles and vehicles that are under warranty by the factory or the dealer. The Blue Book states that these appropriate amounts should be deducted for needed reconditioning.

How do banks do this? Do the bankers emerge from their offices and walk over to the vehicles they are providing loans for? Do they check the oil and listen to the engine run? The answer is obviously, “No”.

The bank officer compares Blue Book values to what is reported on the purchase order. They are not too concerned about the condition of the vehicle or any of the "practical" stuff. Yet, as consumers, we know that color, condition, options, smell, rips in the upholstery, or cigarette burns in the carpeting can drastically affect the desirability of the vehicle and therefore its price.

How can a set of values for a car, which does not cover all the crucial characteristics, affect the loan value, which is a measure of the car's worth? There is no other way to evaluate what a car is worth or what a car will be worth if you don’t make payments and the bank has to repossess the vehicle and sell it to get the money back. You then return to the major value that determines the loan: how the bank can get its money back if it has to. If your ability to repay is solid, banks will lend you whatever you want for your vehicle, even if you grossly overpaid the dealership.

Therefore, as a borrower, your job is to make yourself appear so reliable on a loan application that you can get the best terms possible, both in rates and in percentage of the value of the car.

Here’s how you should do this:

• You must come across as an exceptional loan candidate. It always helps to dress well and look financially conservative. A large part of the initial evaluation is based on your behavior and dress.
• Never mention turmoil such as divorce and layoffs. The loan officer will wonder if you will still be able to pay off the car loan with all the other demands on your money. Make it look like as much of your income as possible will be available to go toward the loan.
• Appear as though there are fewer people enjoying a piece of your income. If you have kids and an ex who consume a piece of your income, or if your significant other has children and an ex who also share your income, the bank may presume that there are too many constraints on your salary. The bankers will, of course, consider your income with deductions, but they will also consider you, your whole family and all your financial obligations, and then look at whatever remains as money available for repayment of a loan. The bank will give you no points for being a good parent.
• Do not even attempt to get an-out-of-state-loan, because it would be a nightmare for banks to repossess an out-of-state car. So the loan process is nearly impossible.
• Do your best to show a long, steady work history based on salary, not commission. Banks object to commissions as a basis for a loan because they fluctuate with the economy.
• Show long-term stability in your residence. Banks like to know where to go if it is necessary to repossess the vehicle.
• If you feel your loan history is not its best, it may be wise to get a copy of your credit history from one of the credit bureaus before your loan interview. For example, you can obtain your TRW credit report by calling 800-392-1122. This will prepare you to answer questions about any credit flaws such as late payments or disputes.
• Many people are embarrassed about their credit history and will not risk embarrassment by visiting banks. They would rather go to an auto dealership and pay more to avoid the discomfort and anxiety, even though most dealerships ultimately finance through banks.
• Make sure you ask for enough money to be able to buy the vehicle you want. Don’t starve yourself.
• As a rule, always ask for 1 percent less on your interest rate due to some made-up reason, and see if it works. It’s always worth a try.

Go to a bank or a credit union armed with your credit report. Then reason for the best rates available, and come out of the bank with a loan in advance of your trip to a dealership. This way, you can tackle the dealership without worrying about how you’re going to pay for the car.

It is best when going for a loan on a new or used car that you make sure that the bank knows what dealership, private party or auction you plan to purchase the car from. This will prevent the chance of the bank canceling your loan based on a misunderstanding.