When Should You Get Preapproved for a Car Loan?
Getting preapproved for an auto loan before shopping for a vehicle can help you understand your potential financing budget.
A preapproval is not necessarily a final loan agreement, but it can provide useful information about possible financing terms.
Consider Getting Preapproved Before Visiting Dealerships
Knowing your potential financing range before visiting a dealership can help you focus on vehicles that fit your budget.
It can also provide a financing offer that you can compare with dealer financing.
What Information May Be Required?
Lenders may request information such as:
- Income information
- Employment information
- Credit information
- Requested loan amount
- Vehicle information, depending on the lender
Requirements vary by lender.
Preapproval Is Not the Same as Final Approval
A preapproval can have conditions and may depend on the final vehicle, loan structure and verification of information.
Read the lender's preapproval terms carefully.
Why Preapproval Can Help With Budgeting
Without financing information, buyers may focus primarily on the vehicle's sticker price.
A preapproval can provide a better understanding of the relationship between the vehicle price, down payment, loan amount and financing cost.
Compare the Dealer's Offer
After receiving a preapproval, you can compare it with financing offered through the dealership.
Compare APR, term, amount financed and total cost.
Do Not Forget Taxes and Fees
The amount you ultimately finance can be higher than the vehicle selling price because of taxes and eligible fees.
Your budget should account for those costs.
Calculate Your Target Payment
Our car loan calculator can help you estimate a target payment before applying for financing.
Final Thoughts
Getting preapproved before shopping can make it easier to understand your financing options and compare dealer offers.
Use the preapproval as a reference point and review the final loan agreement carefully before signing.