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How to get preapproved for an auto loan and gain negotiation power

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When it comes to vehicle financing, you want to do all you can to be in control of negotiations. One way to have an edge when purchasing a vehicle is to apply for auto loan preapproval. Taking this step means that a potential lender has looked at your credit history, application and required documentation and is willing to give you a formal loan offer of a specific amount.

This is different from prequalification — though the terms are used interchangeably at times. When you prequalify for a loan, the lender only does a soft credit check, and approval isn’t guaranteed until you submit the full application.

Getting preapproved for a car loan only takes a bit of additional time and ensures that you have a firm idea of not only how much you can spend once you go car shopping, but also the interest rates and terms you’ll likely be offered.

Step 1. Organize the necessary documents

You can get preapproved for a car loan by going through online lenders, banks or credit unions. No matter which option you choose, the first step is to gather all the necessary documents needed for an application. These include:

  • Personal information, like your name, Social Security number, driver’s license, contact information and home address.
  • Income, including your employer, its contact information and your annual income.
  • The amount you want to finance and the preferred auto loan term.
  • Information about the age and mileage of the vehicle if you’re buying used.
  • Trade-in information, if applicable.

Step 2. Shop around for loan options

Just as you will shop around for your vehicle, it’s a good idea to compare lenders as well. Your interest rates are determined by your credit history and a combination of other factors — all of which may vary to some degree by lender.

By shopping around, you may be able to secure a more favorable interest rate, as well as more beneficial loan terms. Securing an interest rate that’s even a tenth of a percentage point lower can make a big difference in how much you spend over the life of a loan. To get the best deal, fill out applications with multiple lenders. Check out Bankrate’s winners for the best auto loans to start your search.

Keep in mind that preapproval applications will temporarily reduce your credit score if they require a hard inquiry. Because of this, it’s best to complete all applications within a two-week period so that they only count as a single inquiry.

Step 3. Submit the preapproval application

Depending on the lender, the application process will be similar to that of a typical full loan application. You can visit lenders’ websites or apply in person to submit your application. If you choose to submit online, be sure to spend some time researching the most reputable lenders.

No matter which way you opt to submit your application — online or in person — you can expect to spend about 15 minutes completing each application. Some lenders have a more extensive preapproval application process than others, and some may require a minimum credit score or information about vehicle age and mileage. Look for details about application requirements on lender websites prior to applying.

Benefits of auto loan preapproval

There are many benefits to car loan preapproval, including putting you in the driver’s seat when it comes to negotiating the best deal and getting the most competitive interest rates available. 


Dealerships can feel very overwhelming and the car buying process itself can be daunting. Entering this process with an offer in hand gives an added layer of comfort and ease. It also prevents you from having to do math on the side to calculate potential monthly payments. Instead of worrying about finding vehicle financing you can focus on choosing the right vehicle for you and your lifestyle. 

Protection against unnecessary add-ons

Many times, dealers will push for their own financing or focus on the monthly payments — which can set buyers up with long loan terms and bad interest rates. By coming in with preapproval you already know that you have a competitive interest rate and a firm number for what you can afford. This can make it much easier to say no to additional add-ons or warranties offered when it comes time to sign paperwork. 

Better grasp on expected cost

The true cost of vehicle ownership tends to be higher than expected for first-time buyers. Having a solid number for what you can borrow will make it that much easier to budget and keep your expectations grounded when shopping. It is recommended you calculate various potential auto loans in advance so you know the amount you can comfortably borrow. 

Stronger negotiation power

Although dealership financing can be a good idea for some drivers, preapproval means that you won’t feel pressured to use the salesperson’s suggested financing options. Dealers will also see your commitment to getting a vehicle and will likely be willing to negotiate to get your business. They may even be able to offer a more competitive rate from their network of lenders.

Next steps

If you’re preparing to go car shopping, getting preapproved for an auto loan will give you a firm idea of how much you can spend. It also puts you in control when it comes time to negotiate.

Before submitting your preapproval application, gather the necessary documents — and if you plan to apply online, be sure to research reputable lenders.

Learn more

Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by
Auto loans editor