This article contains links to products or services from one or more of our advertisers or partners. We may receive a commission when you click or make a purchase using our site. Learn more about how we make money.

How car loan pre-approval works

Secure your financing with a pre-approved car loan, and knock down your dealer's price.


Fact checked

Walking into a dealership with a pre-approved car loan not only helps you know your budget, but it gives you bargaining power to get the best rate. However, it can also limit how much you’re able to spend on your new car.

Car Loans Canada

  • Min. Loan Amount: $7,500
  • Max. Loan Amount: $55,000
  • Interest Rate: 3.99% to 29.95%
  • Loan Term: 12-84 months
  • $0 down options available
  • All credit scores considered
  • Quick and simple financing
  • Safe and secure loans

Car Loans Canada

Search thousands of vehicles online, including $0 down options, from dealers across the country and get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.

  • Min. Loan Amount: $7,500
  • Max. Loan Amount: $55,000
  • Interest Rate: 3.99% to 29.95%
  • Loan Term: 12-84 months

How to get pre-approved for a car loan

You can apply for an auto loan online, in person or over the phone.

  1. Get a copy of your credit score.
  2. Ensure you have all of your personal documents and income information (pay stubs, notice of assessment, valid government-issued photo ID, list of your debts and assets etc.).
  3. Compare loans that you’re eligible for to find the one that works for you.
  4. Contact your bank or the lender you wish to apply with.
  5. Shop around for your next car.

Find a car loan that’s right for you

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
Car Loans Canada
3.99% to 29.95%
12-84 months
3+ months employed, min. income of $2,000/month
Search thousands of vehicles online, including $0 down options, from dealers across the country and get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
CarsFast Car Loans
4.90% to 29.90%
12 months - 8 years
Gross income of $1,800/month, 3+ months employed
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs. Apply online to purchase a new or used vehicle and get the vehicle delivered to your door.
Loans Canada Car Loans
0% to 29.99%
3-96 months
Employed for at least 3 months, min. income of $1,800/month
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Carloans411 Car Loans
1.90% to 19.99%
Up to 72 months
Employed for 3+ months, min. income of $1,600/month
Get connected with suitable lenders through CarLoans411. Finance your next car, van or truck with loans available in amounts from $500 to $50,000. Check eligibility for this loan through LoanConnect.
LoanConnect Car Loans
10.00% to 46.96%
6-60 months
No min. income requirement
Get access to 25+ lenders through LoanConnect's brokerage. Receive pre-approval in as fast as 60 seconds and get your funds in as little as 24 hours.
Auto Arriba Car Loans
8.99% to 29.50%
6-84 months
Currently employed for 3+ months
Auto Arriba offers car loans starting at $3,500 up to $100,000, with as little as a 30 minute loan turnaround time. On a limited number of approved loans, Auto Arriba is currently offering a rebate of the amount of your first scheduled payment 30 days after it has been processed up to a maximum of $500.
Fairstone Secured Personal Loan
19.99% to 23.99%
3-10 years
Have an established credit history and own your home
Fairstone offers secured personal loans up to $35,000.

Compare up to 4 providers

How pre-approval works for auto loans

Find lenders online, in-person or over the phone who will evaluate your financial situation to determine how much you can borrow. You’ll provide information like your monthly income and your debt, and the lender checks your credit. Lenders usually do a soft pull on your credit for pre-approvals, so it won’t affect your credit score. If you’re pre-approved, it’s only good for a short amount of time, so you’ll need to find the car you want and complete the transaction before your window of opportunity closes.

Why would I want auto loan pre-approval?

If you walk into a dealership with a pre-approved car loan, then you’re prepared to get the best deal and can negotiate the list price and your interest rate with confidence. If your pre-approval is for 11% APR, offer the salesperson 8%. If they come back with 9%, you’ve scored a better deal for yourself. Getting pre-approval doesn’t mean that you have to get a loan that matches the terms of your pre-approval, so if the dealership can give you a lower rate, take it. If you can’t get a lower rate, you can always keep shopping around until you find a better deal.

What is conditional approval for a car loan?

Conditional approval is given when the lender agrees to give you a certain amount to buy a car, assuming that the information on your application regarding the car’s value is true. The lender still has to verify the car’s worth with the dealership, and once the loan officer or underwriter is satisfied that all the information on your application is correct, the terms of the loan can be unconditionally approved. This means that your application will be moved forward to the stage where your funds are settled and your car purchase is finalized with the dealership.

In contrast, pre-approval holds less weight than conditional approval, because pre-approval only indicates the amount that you are theoretically eligible to receive for an auto loan, given your personal and financial information. It does not signal a binding commitment from the lender. You still have to apply for a loan, and the lender could decide to give you a different amount from the one you were pre-approved for or even nothing at all!

Pre-approval indicates to dealerships what lenders are likely to loan you for a car, but conditional approval is a much more powerful bargaining tool, because it indicates that a lender is actually going to give you a certain amount of money as long as a certain condition is met.

Pre-approval vs. pre-qualifying

When it comes to car loans, pre-approval is not the same as pre-qualifying. Pre-approval means that you’re ready to buy the car and essentially already have the money. It usually involves a soft inquiry of your credit history, which will not hurt your credit score. However, when you actually apply for the car loan for which you’ve been pre-approved, a hard credit check will be performed, which will temporarily hurt your credit score.

Pre-qualifying is useful if you just want to get an idea of which rates and terms a lender will give you for a car. It’s essentially about determining your eligibility for a car loan, and involves a soft credit pull that gives you a ballpark estimate of the loan you might get when you apply. It’s helpful when comparing lenders, but it won’t give you leverage for negotiating a price, because you have not yet been approved to receive the money for the car.

A row of cars on a street

Should I get a pre-approved car loan?


  • Confidence in your financial situation. Because the lender assessed your finances and gave you the green light to purchase a vehicle, you don’t have to stress about securing financing.
  • Bargaining power. Knowing how much you can spend gives you the upper hand when negotiating a price at the car dealership because you can use the money you conditionally have to convince the dealer to give you a good price.
  • Receive a lower interest rate. If the pre-approved loan came with an interest rate, you can haggle with the dealership to see if they can offer you a more competitive in-house financing deal — let them make the first offer. If they want your business, they might work to one-up the offer you got from the outside lender.
  • Fixed interest. A fixed interest rate can help you maintain a budget without having to worry about market fluctuations raising your interest rate.


  • Short approval time. Auto loan pre-approval usually only lasts for a short window of time.
  • Limited budget. Because you’ve been pre-approved for a set amount, your car options may be limited if you want a car that’s priced beyond what the lender will give you.
  • Smaller market. There aren’t as many lenders that offer pre-approved loans compared to lenders offering standard car loans.
  • Secured loan. If your credit is poor, your loan option may be based on the condition that your car will be used as collateral for the loan. In this case, your car will be repossessed if you can’t make your payments.

More features to consider

Notwithstanding the potential drawbacks, you can get some of the best features and interest rates on the market with a pre-approved car loan.

  • Choice of fixed or variable interest rates. Keep your repayments the same each months or take advantage of the flexibility of a variable rate loan.
  • Up to seven-year loan terms. Longer loan terms can help make the regular payments more affordable. Fixed rate loans may only come with maximum loan terms of up to five years. Keep in mind that longer terms, though, lead to greater amounts of interest paid over time.
  • Weekly, twice a week and monthly payment options. This differs among lenders, but you’ll usually have the choice of when you want to make your loan payments.
  • Extra payments. Some pre-approved car loans allow borrowers to make additional repayments without penalty.

5 tips to get pre-approved on a car loan

Here are a few things to keep in mind before you buy your new wheels:

  1. Research your car. The make. The model. The year. The color. Also take gas efficiency costs into consideration.
  2. Check your financial standing. Car loans are a serious financial commitment. Be sure that a loan is something that you can realistically fit into your budget.
  3. Test drive your car. Taking the car for a test drive helps you determine if there are any issues.
  4. Take the car to a mechanic. Even if it costs a little extra, having a mechanic eyeball your car for any problems under the hood could save you a boatload of money down the line.
  5. Shop around. Your next car may be available from several dealers — it would be good to shop around and find out which dealership is offering the most competitive deal for your preferred vehicle.

Bottom line

When you’re searching for a pre-approved car loan, keep in mind that not all loans offer pre-approval as an option. If you want the security of knowing what your car budget is and what you can approach a dealer with in order to negotiate, it’s important to know exactly which lenders will pre-determine this information for you.

Frequently asked questions

Pictures: Shutterstock

More guides on Finder

Go to site