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Get preapproved for car finance
Up your bargaining power before heading to the dealership.
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Walking into a dealership with a preapproved loan allows you to lock in rates and terms on a loan before shopping for a car. However, it can limit how much you’re able to spend on your new car. Let’s take a closer look.
How preapproval works for car finance
With vehicle finance, preapproval works by allowing you to lock in the rates and terms on a car loan before heading to the dealership. It draws out period between getting approved for a car loan and signing the loan documents.
Unlike preapproval on other types of loans, auto loan preapproval typically requires a full application, documents and a hard credit check.
4 tips to help get preapproved for car finance
Consider these four tips before you submit a preapproval application:
- Create a budget. Before you begin, calculate your potential monthly payments and learn how much you can afford. This can help guide you toward lenders that offer preapproval options you may qualify for.
- Check your financial standing.Vehicle finance is an expensive commitment. Be sure that a loan is something you can realistically fit in your budget and understand your credit score before you apply for preapproval.
- Research your car. Having a car already in mind when you apply for preapproval can help — it gives the lender something to go by when determining whether or not to offer you a loan.
- Shop around. Not every lender offers the same car loan. Seek preapproval from multiple lenders to increase your chance of qualifying for a loan.
What are the advantages of preapproval for car finance?
- Increased confidence. The lender assessed your finances and gave you the green light to purchase a vehicle, so 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.
- Fixed interest. A fixed interest rate can help you maintain a budget without having to worry about fluctuations in the market 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. Preapproval can protect against dealership markups.
- Avoid upsales. Preapproval gives you a specific amount you have to spend. When the salesperson tries to upsell you with insurance or an extended warranty, you’ll know if you can afford it.
Why might I want to hold off?
- Short approval time. Car finance preapproval is often only available for between 30 and 60 days. If you’re not ready to finance a car within the month, you should wait to apply for preapproval.
- Limited budget. Because you’ve been preapproved for a set amount, your car options may be limited. This can be beneficial if you don’t want to overspend, but it might restrict which models you can get.
- Smaller market. Not all lenders offer preapproval, and some might still require a hard credit check — even before you’ve accepted the loan.
Should I get preapproved for car finance?
It depends on your situation. You might want to get preapproved 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 negotiate. Going to a lender with a preapproved rate in hand is key to making a solid case for yourself.
- You aren’t set on a dealership. Having a preapproved car loan effectively makes you a cash buyer. If you don’t like one dealer is offering, you can move on to the next.
Preapproval vs. prequalifying
When it comes to car loans, preapproval is technically not the same as prequalifying — though some lenders might use the two term to refer to the same process.
- Tip: If a lender advertises “locked in rates,” it’s typically talking about preapproval, not prequalifying.
How to get preapproved for vehicle finance in 4 steps
You can apply for an auto loan online, in-person or over the phone, depending on your lender.
- Ensure you have all your personal documents and income information.
- Compare a range of loans that you can apply for.
- Fill out one or more preapproval applications with multiple lenders.
- Shop around for your next car.
What happens after I get preapproved?
After you get preapproved for a car loan, most lenders allow you to shop around for around 30 days to find the right car. Some might offer preapproval for as long as 60 days.
Once preapproved, lenders typically give you a check 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.
Getting preapproved for a car loan in South Africa can be helpful for buyers who want to negotiate with a dealer or are willing to shop around for a car. But since not all lenders offer preapproval on their car loans, it could limit your options. Check out our guide to car finance to ensure you’re making the right moves when buying your next car.
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