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Pre-approved car loans

Find out how to get car loan pre-approval and compare lenders who offer this type of car loan online.

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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, getting pre-approved for a car loan can also limit how much you’re able to spend on your new car.

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 get pre-approved for a car loan, it’s only good for a short amount of time, typically 30 days, so you’ll need to find the car you want before your window of opportunity closes. Once you find a car, get final approval from your lender by completing the rest of the application process.

Compare lenders that offer pre-approved car loans

Name Product Min. Loan Amount Interest Rate Loan Term Min. Credit Score Requirements
CarsFast Car Loans
$500
4.90% to 29.90%
12-96 months
300
Min. 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
$500
0% to 29.99%
3-96 months
300
Min. income of $1,800 /month, 3+ months employed
Get access to financing from multiple lenders across Canada through a single application with Loans Canada. Bad credit, CERB and EI borrowers are considered.
Car Loans Canada
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
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.
Coast Capital Car Loan
$10,000
Varies
18-84 months
650
Able to service debt payment of $300/month
Finance or lease both new and used vehicles with competitive rates and flexible terms from one of Canada's largest credit unions. No credit union membership required for this product.
Canadian Auto News
$7,500
3.99% to 29.95%
12-84 months
300
Min. income of $2,000 /month, 3+ months employed
Answer a few simple questions to get matched with affordable financing options. Auto loans are also available to those with bad credit, consumer proposals and bankruptcies to help rebuild credit.
LoanConnect Car Loans
$500
9.90% to 46.96%
3-120 months
550
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.
Canada Auto Finance
$500
4.90%-29.95%
3-96 months
300
Min. income of $1,500 /month, 3+ months employed
Canada Auto Finance is a broker that connects borrowers with partnered local lenders. Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
Carloans411 Car Loans
$500
1.90% to 19.99%
Up to 72 months
300
Min. income of $1,600 /month, 3+ months employed
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.
Fairstone Secured Personal Loan
$5,000
19.99% to 23.99%
36-120 months
560
Established credit history and own your home
Fairstone offers secured personal loans up to $50,000.
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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. You’re letting the dealership know a lender is already prepared to finance your purchase.

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.

Is a pre-approved car loan a good idea?

Ultimately, it’s up to you and depends on your situation. You might want to get pre-approved for one of the following reasons:

  • You’re new to lending. Getting preapproved can give you an idea of what type of loan you can actually get without the commitment.
  • You want to stick to a budget. A pre-approval is a great way to know how much you can borrow and to stick within those parameters. You’ll know which cars are out of reach and you can narrow your search accordingly.
  • You want to negotiate. Going to a lender with a pre-approved rate in hand is key to making a solid case for yourself.
  • You aren’t set on a dealership. Having a pre-approved car loan effectively makes you a cash buyer. If you don’t like what the dealer is offering, you can move on to the next.
  • You want to save time. You’re one step ahead of the game if you’re armed with a pre-approval. You can save yourself the time going through a dealership’s finance office to figure out an ideal loan if you already have a pre-approved loan in hand.
  • You want to focus on car shopping. With the financing out of the way, you can zero in on finding the best car for your needs. Instead of running the numbers in your head, you’ll know how much you can afford.

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.

What happens after I get pre-approved for a car loan?

After you get pre-approved for a car loan, most lenders allow you to shop around for around 30 days to find the right car. Some might offer pre-approval for as long as 60 days. Either way, you have a window of time to work with while your pre-approval still stands. If you don’t make a decision during that time frame you can apply for another pre-approval. Ideally your financial situation hasn’t changed much since then so it’s a smooth process.

Once pre-approved, lenders typically give you a cheque that you can use to buy a car at a dealership or with a private party. You aren’t obligated to sign off on the loan if you decide to go with another lender or not make the purchase at all.

How long does pre-approval take?

You can expect pre-approval turnaround times that are as quick as minutes up to one business day, depending on the lender you’re working with.

With online lenders, you can get pre-approved car loans online by filling in their applications within minutes and receiving a decision almost instantly with a list of loan offers from various lenders. In other cases, a lender may need to contact you for more information before making a decision. Car loans from credit unions are often notorious for having longer turnaround times.

If you’re working with your bank, which already has access to your financial information, including your salary and assets, the process may be more streamlined.

What are the advantages of pre-approved car loans?

If you’re on the fence about taking the initiative and getting pre-approved for a car loan, there are some benefits worth taking stock of:

  • 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. Learn more about car loan interest rates.
  • Fixed interest. A fixed interest rate can help you maintain a budget without having to worry about market fluctuations raising your interest rate.
  • Increases loan options. Because you’ll already have a loan, you won’t be stuck with whatever financing package you’re offered. Pre-approval can protect against dealership markups.
  • Avoid upsales. Pre-approval gives you a specific amount you have to spend. When the salesperson tries to upsell you with GAP insurance or an extended warranty, you’ll know if you can afford it.

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 car 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 colour. How much it will cost to insure. Also take gas efficiency costs into consideration because that will be your next biggest expense after your car loan repayments.
  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. You don’t want to be in a situation where you can’t keep up with your payments and your credit score takes a hit.
  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.

Do car loan pre-approvals hurt your credit?

Not necessarily, but it could cause a temporary dip. If you end up getting multiple preapprovals from different lenders with hard credit pulls, your credit score could be affected. However, most of the time lenders are able to pre-qualify and pre-approve potential applications via a “soft pull” on your credit information.

Also, most credit bureaus spot “rate shopping” and can now consider multiple applications for the same type of loan as one. They group these similar credit pulls together especially if they are done within a space of two weeks up to a month, so your score may not decrease significantly.

Can I get a pre-approval on a car loan with bad credit?

Yes, you can. While it’s pretty easy to obtain a pre-approval with a great credit score and a down payment in hand, people in bad credit situations can get pre-approved for a car loan too. In fact, there are online lenders that specialize in providing car financing for any type of credit situation, including no credit, poor credit and bankruptcy. You can apply online just as you would if you had good credit and you can receive your decision on a pre-approval within minutes.

Can you be denied a car loan after pre-approval?

Yes, you can be denied a car loan even after you’ve been pre-approved for the financing. The most common reason why this happens is because your financial circumstances have dramatically changed since you applied, such as a loss of income or filing for bankruptcy. Your documentation may not match what you provided to your lender initially for your pre-approval, too.

Another instance where this may happen is if you’re dealing with a car loan scam, commonly called a “yoyo scam”. With these scams, a dealer leads you to believe you’ve been approved for financing and then tells you you’ve been denied. They may follow up with you and tell you to sign a contract with less favourable terms to lock in financing. To avoid this altogether, stick to reputable lenders and do your research on your lender before working with them.

Steps you can take if you can’t get pre-approved

If you’re having trouble getting pre-approved for a car loan, don’t fret. You can turn your situation around by taking on these measures:

  • Get your credit in great shape. A major reason why lenders may be turning down your pre-approval request is your credit history. If you have a history of making late payments, missing payments altogether or maxing out your credit card, your credit score may reflect these mistakes. Take your time to rebuild your credit, pay off your debts as much as you can and make sure you’re staying on top of all your debt repayments. Within six months’ time, your credit score should see a boost from all of your efforts.
  • Increase your income. You may not have been pre-approved because your lender worried you can’t keep up with the debt repayments. You can reassure them by earning more income or even lowering the amount you’d like to borrow. Another way to bypass this challenge is to save up for a hefty down payment. With more cash to put down upfront, you’ll reduce the amount you need to borrow.
  • Look into getting a cosigner. Another way to successfully get pre-approved is to ask a family member or close friend to cosign on your loan and act as a guarantor. The catch? If you default on payments, your guarantor will have to pick up on your loan, so make sure they are aware of what they are committing to. Both of your credit scores will take a hit if you default on your loan.

Pre-approvals for new and used cars – is there a difference?

There isn’t a striking difference between pre-approvals for new and used cars. The major disparity is the amount you may be asking to borrow because new cars will come with a bigger price tag. In this instance, it may be easier to get pre-approved for a used car compared to a new one.

Keep in mind that your lender is conditionally approving you, giving you a certain amount to buy a car. They still need 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. Your lender doesn’t want to finance a used car that they won’t get their money back on if you end up defaulting on your loan. Basically, even with a pre-approval on hand there are still some hoops for you to jump through!

Conditional approval vs pre-approval

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.

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

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