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How to get pre-approved for a car loan

Learn about 5 simple steps to get car loan pre-approval and compare lenders that offer this type of car loan online.

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  • Rates from 4.90% - 29.90%
  • Terms from 12 - 96 months
  • New and used vehicles
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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. Banks, credit unions and online lenders can offer car loan pre-approval.

How to get pre-approved for a car loan

  1. Know your credit score. Knowing your credit score will give you an idea of how attractive your application will be. You can get a free copy of your credit report from credit bureau Equifax. A credit score above 660 is typically considered “good”.
  2. Compare car loan lenders. Check the interest rates, loan amounts, loan terms and eligibility requirements of the lender.
  3. Apply selectively. Only apply for car loans where you meet the eligibility requirements, and limit the number of applications because while some lenders won’t run a hard credit check at this stage, others might. The amount of information you’ll have to provide will depend on the lender, but generally, you’ll need to provide your name, address, date of birth and employment details.
  4. Review and submit. Make sure your details are correct because errors could result in a rejection. Once you submit your application, wait for a team member to contact you.
  5. Get pre-approval. The team member will discuss rates and terms with you.

Pre-approval does not mean you’re guaranteed the loan. If you wish to proceed with a car loan, the lender will ask for supporting documents, like pay stubs and government-issued ID, to verify the information you’ve given so far and to do a more in-depth review of your finances. This includes a hard credit check. If everything looks good and there are no surprises, the lender will give official approval.

Compare lenders that offer pre-approved car loans

Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements Table description
CarsFast Car Loans
$500 - $75,000
4.90% - 29.90%
12 - 96 months
300
Min. income of $2,000 /month, 3+ months employed
Get a new or used vehicle delivered to your door.
Browse thousands of vehicles from dealers across Canada and get matched with financing that meets your needs.
Loans Canada Car Loans
$500 - $35,000
0% - 29.99%
3 - 96 months
300
Min. income of $1,800 /month, 3+ months employed
Compare rates from multiple lenders.
Complete a single application to get quotes from different lenders. Bad credit, CERB and EI borrowers considered.
AutoLoanProviders
$7,500 - $85,000
3.99% - 29.99%
12 - 96 months
300
Min. income of $1,800 /month, 1+ months employed
Available in Ontario only.
Apply online and get your new vehicle delivered to your door anywhere in Ontario free of charge. All credit scores considered.
Coast Capital Car Loan
$10,000 - No Max.
Varies
18 - 84 months
650
Able to service debt payment of $300/month
Competitive rates and flexible terms.
Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.
Splash Auto Finance
$10,000 - $50,000
9.90% - 29.90%
24 - 84 months
300
Min. income of $2,200 /month, 3+ months employed
Apply with any credit score.
Get financing for a new or used car. Auto loans for borrowers with fair credit, bad credit, no credit or bankruptcy.
goPeer Car Loan
$1,000 - $25,000
8.00% - 31.00%
36 - 60 months
600
Min. income of $40,000 /year
P2P platform with competitive rates.
Canada's first regulated consumer peer-to-peer lending platform that connects creditworthy Canadians looking for a loan with Canadians looking to invest.
Carloans411 Car Loans
$500 - $50,000
1.90% - 19.99%
Up to 72 months
300
Min. income of $1,600 /month, 3+ months employed
High application approval rate.
Get connected with suitable lenders to finance your next car, van or truck. Check eligibility for this loan through LoanConnect.
Canada Auto Finance
$500 - $45,000
4.90% - 29.95%
3 - 96 months
300
Min. income of $1,500 /month, 3+ months employed
Get financing from partnered local lenders.
Financing for a new or used car is available for borrowers with bad credit, no credit, CERB, EI or bankruptcy.
LoanConnect Car Loans
$500 - $50,000
9.90% - 46.96%
3 - 120 months
550
No min. income requirement
Pre-approval in as little as 60 seconds.
Get access to 25+ lenders through this brokerage. Get your funds in as little as 24 hours.
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Compare up to 4 providers

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 car loan pre-approval. Ideally, your financial situation hasn’t changed much since then so it’s a smooth process.

How long does car loan pre-approval take?

You can expect pre-approval turnaround times that are as quick as minutes up to 1 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.

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.

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 is that your financial circumstances have dramatically changed since you applied, such as a loss of income or filing for bankruptcy. Another reason for rejection is your supporting documents not matching the information you’ve previously given the lender.

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.

When should I apply for car loan pre-approval?

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

  • You’re new to lending. Getting pre-approved 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.
  • You want to buy a car within 30 to 60 days. Pre-approval is only valid for a certain period of time, so apply when you’re ready to buy a car.

    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. For example, 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.
    • 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.
    • 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 up-sales. 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.

      Do car loan pre-approvals impact your credit?

      It depends. If you end up getting multiple pre-approvals from different lenders who do hard credit pulls, your credit score could be affected. However, most of the time, lenders are able to 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 2 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.

      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:

      • Improve your credit. 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 6 months’ time, your credit score should see a boost from all of your efforts.
      • 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 comes before pre-approval. It’s useful if you just want to get an idea of which rates and terms a lender might 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.

      5 steps to buying a car

      Here are a few steps to keep in mind before buying a car:

      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.

      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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