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How to get pre-approved for a car loan

December 04, 2023 | 3 min read

In this article

  • Getting pre-approved for an auto loan can help you with budgeting and streamline your car-buying process.
  • Pre-approval can also help you avoid unnecessary expenses and save you time during your car purchase.
  • Whether you are buying from a dealer or private seller, pre-approval puts you in control of your car purchase.

When you're looking for a new set of wheels, getting pre-approved for a car loan is an important step to take before you start your search. Why? Because you'll walk in the dealership with the confidence of knowing you are already approved for a loan. Plus, you'll make the entire process of buying a car, truck or SUV smoother. Below, we've outlined how to get pre-approved for a car loan.

How to get pre-approved

Follow these steps to apply for pre-approval on a car loan:

  1. Determine how much you want to borrow. You don't need an exact number at this point, but you’ll want to have a ballpark figure to share with potential lenders.
  2. Prepare your documents and information. You’ll likely need the following to complete your pre-approval application
    • Residential address
    • Social Security number
    • Employment information, including place of employment and gross monthly income
    • An estimate of how much you’d like to borrow and your desired loan term
  3. Fill out the application. You can generally fill out a pre-approval application online  by visiting the lender’s website and searching for this option. If your lender does not offer online applications, you’ll have to visit their branch or office and fill out an application in person.
  4. Start shopping! If you get pre-approved, you’ll typically have 30-60 days to shop for a car before the pre-approval expires.

List of reasons why to finance your auto loan with a credit union like Desert Financial. Reasons include: lower rates, great customer service, member perks, potential for discounts and giving back to the community.

Why get a pre-approval?

There are several important benefits to getting pre-approved for an auto loan. Here are a few of the top reasons:

  • Set a realistic budget. A pre-approval tells you the exact amount of money you qualify to borrow and an estimated interest rate. Having this information in hand will help you budget for your new car with your monthly payments in mind. When considering your budget, it’s best to look for a car that falls slightly below your maximum loan approval amount, as you’ll need to reserve approximately 10% of the loan amount for taxes and fees. Take your planned down payment into account as well, as this can help offset the purchase price. Finally, when determining your monthly car expenses, be sure to include insurance, gas and maintenance in your budget.
  • Avoid excessive upsells. Having your exact loan amount in hand will help you avoid last-minute add-ons that you don’t need, which increase the amount of the loan.
  • Save time (and potential heartbreak). Instead of finding out you’re not approved for a loan after you’ve already chosen your dream car, you’ll save time (and possible heartbreak) up front and know what’s realistic.

What if I’m buying a used car through a dealer or private seller?

A pre-approval can work for almost every kind of car purchase, whether it’s a new or used car. Most dealers will work with credit unions, banks and other lenders, and will be happy to sell you a car through these funding sources. You can enjoy the benefits of getting your pre-approval before shopping for a used car at a dealer.

However, if you’re purchasing your car through a private seller or smaller dealer, things will be a bit different. If and when you’re approved, the lender will pay the seller the amount you owe and then you’ll repay the lender over the life of the loan.

Ready to hit the dealership? With your pre-approval letter in hand, you can feel confident knowing that you essentially have the money available to pay for the car, truck or SUV you have in mind. This way, you’ll be the one in charge of your purchase (not the salesperson). By having your financing set up in advance, you can focus on what’s really important — getting the best deal on the ride you really want!

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The material presented here is for educational purposes only and is not intended to be used as financial, investment or legal advice.

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