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3 benefits of getting pre-approved for an auto loan

Discover wise car shoppers' secrets. A pre-approved loan can help you get better car deals.

While searching for your dream car you may have come across the term “pre-approved loan.” We'll explain what that means and why it can make car shopping easier. Learn how pre-approval for auto loans work and the benefits of the process.

What is an auto loan pre-approval?

When you apply for a car, motorcycle, or home loan, you have the opportunity to get pre-approved before you make your final decision. This means a lender such as a credit union or bank has reviewed your financial history and determined you are a viable candidate to whom they can lend money. It doesn’t guarantee that you’ll receive a loan, but it’s an endorsement that the lender is willing to let you borrow a specified amount of money.

Why you should get pre-approved

Most car shoppers skip the pre-approval process because they don’t know how advantageous it can be. Here are three common benefits of being pre-approved for an auto loan. 

1. It makes it easier to stick to your budget

If you’re not pre-approved for a loan, it’s hard to know how much you can afford to spend and how to prepare your budget. Once you're pre-approved for a specific amount, you can target vehicles that fall within that price range and monthly payment and avoid falling in love with a car you really can't afford. 

2. It gives you the opportunity to find the best available rate

Pre-approval also means you have more time to find the best loan rate. Instead of being pressured to sign off on a high interest rate loan, you have time to compare prices with different lenders. Give yourself extra time to shop for cars with a pre-approved loan.  

3. It gives you more leverage when negotiating with dealerships 

In addition to extra shopping time, pre-approved auto loans also give you more negotiating power. Dealership car loans are not always beneficial for the shopper. Car dealerships will often offer high-interest loans, convincing consumers this is the lowest interest rate they can get.  

Your pre-approved loan is confirmation of the lowest interest rate for which you can qualify. You can then compare this rate against what the dealership is offering you. If their rate is not comparable, ask them if they can match it—or go even lower. 

With pre-approval, you’ll know your monthly payment amount beforehand. This will eliminate the exhausting haggling at the dealership to lower your monthly rate. Focusing on the established monthly rate and ignoring upsells will help make the car buying process quicker and less stressful.

Finally, if you know exactly what price and monthly payment you qualify for and that it fits your current budget, it's easier to tell a salesperson no if they try to convince you to accept a higher price than what you've already decided you can afford.

How to get an auto loan pre-approval

Now that you know the benefits of getting pre-approved, you may be wondering how to get the process started. Visit your local credit union like Vibrant, your national bank, or online lender to complete a pre-approval loan application

It’s a good idea to get multiple pre-approval offers from different lenders to make sure you get the best rate. But be aware that an auto loan pre-approval expires after 30–60 days. Once you get your offers, start shopping at car dealers before your pre-approval expires.

Start your pre-approval process with Vibrant Credit Union

A pre-approved loan will give you ample leverage when shopping for a new car. Many car shoppers prefer to get pre-approved with Vibrant Credit Union because of our easy and stress-free process. In fact, you can complete the pre-approval process entirely online or over the phone. Contact us to discuss pre-approved loan options with a friendly, knowledgeable banker.