How to Get Preapproved for a Car Loan

Written by Kim PinnelliReviewed by Nathan Brown, CFP®Updated: 19th Apr 2022
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Getting preapproved is one of the smartest things you can do when buying a car. You’ll know what you can afford, find the best offer, and be prepared when you find your dream car.

Getting preapproved for a car loan is simple. Here are the simple tips.

How Do I Get Preapproved to Buy a Car?

To get preapproved to buy a car, you’ll need to check your credit, provide your financial documentation, and find the right auto loan lender. Here’s how to do it.

Check Credit Score

It’s always a good idea to check your credit score before buying a car. You can sign up for Experian for free, but your credit card company or bank may also offer free access to your credit score. Make sure it’s as high as you can get it before you apply for pre-approval, so you get the best offers.

If you want to know what’s creating the credit score you have, pull your free credit reports and see what you might need to change. For example, if you have late payments or you overextended your credit line, you should fix the issue so your credit score can increase, and you can get the best car loan terms available.

>> More: How to Get a Car Loan

Gather Necessary Documents

Banks or dealerships will ask for specific documentation to ensure you qualify for a car loan. You must document your:

  • Income (paystubs and W-2s)
  • Address (current and past)
  • Debts
  • Proof of funds for a down payment
  • Identity
  • Proof of insurance

Every lender will need something different, so always ask up front what they need so you can be prepared and get preapproved right away.

Shop Around

With the right information ready, you are ready to shop around and get quotes from at least three lenders. Don’t worry, and it doesn’t hurt your credit score to get quotes from other lenders. Just make sure you apply for pre-approval within a 3 – 4-week period, so the credit bureaus treat it as one inquiry.

When you shop around, compare the interest rate, fees, and APR for each loan. You may find that loans with a low-interest rate have a higher APR because of fees.

>> More: Compare the Best Auto Loan Rates

What Credit Score Do You Need to Get Preapproved for a Car Loan?

The good news is you don’t need perfect credit or even great credit to get preapproved for a car loan. Most lenders have options for borrowers with great credit and those with just ‘okay’ credit.

Here’s the kicker.

The higher your credit score is, the better terms you’ll get. You may get a lower interest rate or pay fewer fees, and it pays to maximize your credit score as much as possible to get better terms. While you should have at least a 660-credit score, if your score is lower, don’t assume you can’t get a car loan.

>> More: How Do Car Loans Work?

How Long Does It Take to Get Preapproved for a Car Loan?

Most lenders can do car pre-approvals instantly. Whether you’re applying online, over the phone, at the bank, or at the dealer, you should know right away if you’re preapproved.

Just because you’re preapproved, though, doesn’t mean you should take that loan. Take the offer and compare it side-by-side with other loan offers. Look at the interest rate, monthly payment, fees, and APR. See which loan payment fits your budget and has the lowest overall cost.

What Are the Benefits of Getting Preapproved for a Car Loan?

Forces You to Stick to a Budget

You know what you can afford when you’re preapproved for a car loan. You can’t buy a car for more than you’re approved for, so it limits your shopping to within your budget. You’ll just waste everyone’s time and make it harder on yourself if you shop for a car outside of your budget.

Remember, though, you don’t have to spend as much as you get preapproved for if you aren’t comfortable with it. Play with the numbers in your budget to see what you can comfortably afford, and don’t feel bad if you don’t take the full loan amount you’re offered.

Gives You More Negotiating Power

When you have a car loan pre-approval, it’s like a cash deal, and you’ll be better able to negotiate the price of the car. When you don’t have to worry about financing, and the dealer knows you can go just about anywhere since it’s a ‘cash deal,’ they will be more likely to negotiate with you and meet you where you want so you don’t go somewhere else.

Protects You from Dealer Markups and Upsells

Most dealers offer financing with their partner banks, which seems like a great deal, but there’s one catch. Dealers often inflate the rates they offer you, making a higher commission. If they don’t inflate the rate, they’ll upsell you on other services, warranties, and insurance products you don’t need, but that makes them a lot of money.

When you’re sitting in the finance office at the dealership, it’s easy to succumb to the pressures, especially if they have a good salesperson working the deal. You might think it’s only a few dollars a month, so why not? You don’t realize how much more you’re spending by financing other products into the loan that you don’t need.

Better Interest Rates

When you get preapproved, you can shop around for the best rate. You aren’t under the pressure of needing a loan right now because you already picked out a car. You have the time (and patience) to shop around with other lenders when you get preapproved before you shop for a car.

Should You Get Prequalified or Preapproved for an Auto Loan?

There’s a big difference between pre-qualification and pre-approval. A pre-qualification is an estimate of what you can afford based on the information you provide. It’s not a binding agreement, and it won’t help you when you’re negotiating a deal with the salesperson.

A pre-approval means a bank looked at your qualifying factors and agrees that you qualify for the loan. All that’s left is to finalize the loan, get the funds and buy your car!

Bottom Line: How to Get Preapproved for a Car Loan

Getting preapproved for a car loan is simple, and it’s the smart thing to do. You’ll have more bargaining power at the dealer, you’ll have time to find the best offer, and you’ll speed up the process to buy a car. Shop around for the best deal before you buy a car, and you’ll be driving around in your dream car before you know it!

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Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.