Figuring the size of a preapproved car loan

Bankrate Logo

Why you can trust Bankrate

While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .

Dear Driving for Dollars,
I’m getting ready to buy a new car and plan to get preapproved for a car loan from a bank. I’m wondering: How much should I request for the loan if I am able to put down 20 percent? Should I ask for preapproval on just the difference, or should I pad myself with a few thousand dollars?
— Brendon

Dear Brendon,
First of all, kudos to you for saving enough money to make a 20 percent down payment on your car loan. By doing so, you’ll most likely eliminate the time period that you would be upside down on your loan, where you owe more than the car is worth.

I’m wondering if you’ve factored in the costs to purchase the car, which would include the taxes, title, insurance and other fees associated with buying a car. This easily can add up to thousands. If you haven’t calculated that, make sure you do so before you complete a car loan application. Ideally, you want to pay for those costs upfront versus rolling them into the loan, again to avoid being upside down and paying interest on that amount.

Now, back to your original question of how much money to request for a preapproved car loan. I would suggest you request only an amount slightly higher than what you expect for the car you have chosen, so you stick within the budget you’ve set for yourself. If you request a few thousand dollars more, as you suggest, it’s too easy for you to talk yourself into — or get talked into by the salesman — a more expensive car or a more expensive version of the car you’ve chosen, thereby blowing your budget. So, yes, give yourself a bit of wiggle room, but not so much that you end up spending significantly more than you had planned.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.

More On Cars: