Affiliate Disclosure: Automoblog and its partners may earn a commission if you get an auto loan through the lenders outlined below. These commissions come to us at no additional cost to you. Our research team has carefully vetted dozens of auto lenders. See our Privacy Policy to learn more.
- Preapproval shows you an exact interest rate and prevents most markups.
- You’ll go through a hard credit check if you decide to get a preapproved car loan.
- Getting preapproved for a car loan could give you extra confidence when negotiating.
One of the best ways to give yourself an advantage when financing a new vehicle is to secure a preapproved car loan. When you’re a preapproved buyer, you have a formal offer from a lender, providing extra confidence for any negotiation.
In this article, we’ll explain the benefits of getting a preapproved car loan and we will walk you through the process of getting one. Our team has also researched and ranked the companies with the best auto loan rates to help you make the right decision for your budget.
How To Get Preapproved for a Car Loan
You can get a preapproved car loan from a variety of financial institutions. Banks conveniently combine your auto loan with other financial transactions, while credit unions often have low rates and can be easy to join. Online lenders operate without the overhead of traditional financial institutions, allowing them to offer competitive rates on personal loans.
Whichever route you choose, checking your credit score before applying is a good first step. Making sure that everything in your credit report is correct may boost your chances of qualifying.
What Documents Do I Need?
You’ll need the following documents and information for your application:
- Proof of residence: Whether you rent or own and how long you’ve lived there
- Trade-in information: Bring your current car title and registration if you plan to trade in
- Proof of income: Your gross annual income along with contact details for your current employer
- Credit history: Along with your credit score, this is helpful if it’s available to you
- Down payment method: Have a way to cover the down payment on your new car, whether it’s a credit card or a check
- Personal information: Details such as your date of birth, contact information, driver’s license number, and Social Security number
- Loan specifics: Your preferred loan term and the projected vehicle purchase price, which will help to set your loan-to-value (LTV) ratio
Should I Compare Auto Lenders?
It’s a good idea to compare lenders to get the best interest rate and low monthly payments on your preapproved car loan. A tiny difference in your annual percentage rate (APR) can add up to big savings or a large expenditure over the life of your auto loan.
Taking time to consider your potential options is a great way to lock in the best rate possible. Remember, though, that you only have 14 days to shop around under a single credit score inquiry before a new preapproved car loan application could trigger a fresh credit score drop.
Should I Get Preapproved for a Car Loan?
Even if it’s a good time to buy a car, doing so can be a daunting process if you aren’t confident about what you can afford. With a preapproved car loan, you’ll have less reason to worry about common obstacles to purchasing a new vehicle. You’ll gain peace of mind going into the car-buying process and you may avoid purchasing any unnecessary warranty plans.
When you’re a preapproved buyer, you can focus on car shopping without stressing over auto financing options. That’s because you’ll have a clear idea of what you can afford due to the preapproval process. Another bonus of having a preapproved car loan is that dealerships might offer you an even better deal from their lender network to earn your business.
What’s the Difference Between Being Preapproved and Prequalified?
There’s a significant difference between being preapproved and prequalified by an auto lender. When you’re preapproved, your final APR will typically be the same as your initial rate. This isn’t the case with prequalification, when you only get an estimate of the loan that you may receive.
With prequalification, a lender will check your credit score with a soft credit pull. This is a quick process that doesn’t affect your credit rating, though you’ll only get an estimated value for your potential auto loan.
A preapproved car loan application triggers a full credit check or a hard inquiry. This process temporarily lowers most people’s credit scores, but you can apply to multiple lenders in a 14-day window and have them all counted as one hard credit pull by the major credit bureaus.
Should I Get Preapproved or Prequalified?
There’s no correct answer for whether you should get a preapproved car loan or a simple auto loan prequalification.
Preapproved Car Loan Details | Prequalified Car Loan Details |
Confirmed offer from lender | Estimated loan offer |
Hard credit check | Soft credit check |
APR likely to stay the same | APR subject to change |
If you’re prequalified, you aren’t guaranteed to be approved for a loan. Being preapproved puts you in a similar position to a cash buyer and makes it far easier to negotiate. We’d recommend getting a preapproved car loan if you’re serious about purchasing a new vehicle.
What’s the Difference Between Interest Rate and APR?
Note that there’s a subtle difference between the terms “interest rate” and “APR.” Interest rate refers to the simple rate of interest on your car loan. The APR that appears on your lending contract includes the base interest rate but also factors in additional costs and necessary fees.
The APR will give you a more accurate estimate of how much you’ll end up paying once you receive rates for your preapproved car loan. A loan calculator can help you to determine a potential loan payment, but you’ll need preapproval to know for sure.
Are Rates Lower for New or Used Cars?
Most of the time, APRs are lower for new cars than for used vehicles. Monthly car payments are less for newer models because it can be harder to keep an old car running. Drivers may end up paying less overall for a used car, however, since they’re typically in a lower price range than the majority of newer models.
Best Preapproved Car Loan Providers
Our research shows that Consumers Credit Union currently offers the lowest APR at 3.49%, with myAutoloan.com and PenFed Credit Union also offering affordable rates. Here are some additional details about our top-ranked preapproved car loan providers:
Car Loan Providers | Lowest APR | Loan Terms Offered | Loan Amounts Offered |
myAutoloan.com | 3.69% | 24 to 84 months | $8,000 minimum |
PenFed Credit Union | 4.44% | 36 to 84 months | $500 to $150,000 |
Consumers Credit Union | 3.49% | Up to 84 months | No minimum or maximum |
Keep in mind that the APRs shown here are often available only to borrowers with excellent credit. Interest rates also change frequently, so these rates will change over time.
#1 myAutoloan.com: Most Seamless Process
An online lender founded in 2003, myAutoloan.com offers preapproved car loans with consistently competitive rates. Borrowers need a minimum credit score of 575 to qualify for an offer from myAutoloan, which is a lower requirement than with many lenders. This makes it a strong choice for those who need to secure bad credit car loans.
A good example of how the internet has changed car buying, myAutoloan is an online marketplace that makes it easy to compare rates from a variety of lenders. With an A+ rating from the Better Business Bureau (BBB) and a 4.0- out of 5.0-star rating from Trustpilot, myAutoloan has built a strong industry reputation.
#2 PenFed Credit Union: Best for Good Credit
We’ll note from the start that the 4.44% starting rate for new cars is only available to customers with a 36-month loan who use PenFed’s car buying service. Without using this service, PenFed Credit Union offers rates for new cars that start at 5.24%. Drivers can also get private-party auto loans, which aren’t available from all lenders, through PenFed.
You only need to pay a $5 deposit to become a member of PenFed Credit Union. The group holds a 4.5- out of 5.0-star rating on Trustpilot, which highlights the company’s commitment to customer service.
#3 Consumers Credit Union: Top Credit Union
We name Consumers Credit Union our Top Credit Union because it offers excellent interest rates to most customers and has various loan terms. It’s easy to join Consumers Credit Union; all you need to do is pay a $5 initial fee and keep at least $5 in a savings account.
Consumers Credit Union has an A+ rating and accreditation from the BBB. Drivers can get new or used auto loans from the company, and it also offers options to refinance an existing loan.
Preapproved Car Loan: FAQ
Does preapproval guarantee a car loan?
Getting preapproved means you have a firm offer from a lender. There are instances in which you can be denied for a loan after being preapproved, such as if your financial situation changes or if the loan offer expires. Most auto loan preapprovals are good for 30 to 60 days.
Does preapproval for a car loan hurt your credit?
Applying for a preapproved car loan does require a hard credit pull, which could temporarily lower your credit score. Getting prequalified for a car loan doesn’t affect your credit score, but it also won’t result in a firm offer from a lender. Your credit hit from car loan preapproval should quickly resolve itself, so it’s nothing to worry too much about.
Is preapproval a good thing for a car loan?
Yes, getting a preapproved car loan has many benefits. When you know you’re already approved for a certain amount, you’ll gain added confidence and peace of mind going into negotiations. You can also potentially secure better interest rates after getting preapproved.
Our Methodology
Our expert review team takes satisfaction in providing accurate and unbiased information. We identified the following rating categories based on consumer survey data and conducted extensive research to formulate rankings of the best auto loan providers.
- Industry Standing: Trust and reliability are two of the most important qualities in a lender. Our team considers current industry ratings from organizations such as the Better Business Bureau (BBB) along with factors such as a company’s age.
- Availability: We examine how easy it is for borrowers to get a loan from each provider. Lenders that offer loans to meet a variety of customer needs receive high ratings.
- Loan Details: Our researchers comb through the fine print to learn about the loan amounts, term lengths, and types of loans each provider offers.
- Rates and Discounts: We take an in-depth look at the range of rates each provider offers for borrowers of different credit scores. Our team also factors in the discounts available with each lender.
- Customer Service: Our team considers customer reviews and complaints when determining this score. We also consider the ease and availability of help online, over the phone, or in person.