How do pre-approved car loans work?

Want to get into a new car but don’t know where to start?

By getting your finance sorted before you walk into the dealership with a pre-approved car loan, you’re able to make a clear comparison between the dealership finance options and the option you’ve already secured.

But is it worth going through the process to get pre-approval?

Is it a long process? What are the benefits?

What do you need to do?

Here’s what you need to know.

Key Points

  • A pre-approved car loan can give you a good idea how much you can afford to spend

  • Pre-approval usually lasts for one to three months so it’s best to apply when you’re ready to start car shopping

  • Comparing different lenders can help you find a better value car loan


Whether you have your sights set on a specific car or want to get a better idea of your budget, a pre-approved car loan can tell you how much you’re allowed to borrow.

Having a pre-approved car loan also means you don’t have to rely on financing through a car dealership, which could save you thousands down the line if you can secure a lower interest rate.

But not all lenders offer pre-approval on car loans, and pre-approvals usually only last for a few months before expiring.

They also involve a credit score check.

That said, shopping around to find the right loan for your situation and getting pre-approved can help fast-track you to a new set of wheels.

Here’s what to look out for.

What does ‘pre-approved’ mean for a car loan?

‘Pre-approved’ means a lender has conditionally agreed to lend you a certain amount of money to buy a car.

For example, a lender might pre-approve you to borrow up to $30,000 based on your income and financial situation.

Being pre-approved doesn’t guarantee final approval but it can be very handy for going car shopping with a price guide in mind.

Especially when comparing loans with us means that you could save thousands more than taking out finance from the dealership.

By comparing car loans before you consider finance through a dealership, the difference between a 9% and a 7% loan is roughly $492 per year if you get a car loan for $35,493.

Once you’ve chosen a car, you’ll need to fill in a full car loan application to get unconditional approval.

How does a pre-approved car loan work?

To get pre-approved for a car loan, you’ll need to give the lender some information about you and your financial situation.

This can include documents such as:

  • Your ID

  • Payslips

  • Bank statements

Lenders will also usually do a soft credit score check before giving pre-approval.

If they’re satisfied that you can repay the car loan, they’ll offer pre-approval to borrow up to a certain amount.

Once you know what you want to buy, the lender will check that the car meets their lending criteria.

For example, some lenders only offer loans for newer cars.

They’ll also make sure your financial circumstances haven’t changed since you applied for pre-approval.

For example, if you’ve changed jobs, they might ask for more information before giving you the go-ahead.

If they’re happy, the lender will offer you unconditional approval to borrow a specific amount to buy the car you want.


Is it hard to get approved for a car loan?

It depends on your situation.

But generally speaking if you have a relatively solid credit score and stable income, it’s not hard to get approved for a car loan.

Even if you have inconsistent income - perhaps you’re a freelancer or a contractor - or a less-than-perfect credit score, some lenders may still be willing to approve you for a car loan.

In any case, it’s a good idea to explore different lenders to make sure you’re getting a good deal for your finances.

You can compare car loans from up to 30+ lenders in minutes by taking out a quote with Compare Club.

It’s free to compare and it won’t affect your credit score.

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

Yes, it’s possible to be denied unconditional approval for a car loan after being pre-approved.

Some reasons for this include:

  • The car you want doesn’t meet the lender’s criteria: for example, it’s too old

  • Your financial situation has changed significantly since you applied for pre-approval:for example, you lost your job

  • Poor credit score after a hard enquiry

Keep in mind that even if you’re denied unconditional approval, there could be other lenders out there willing to offer you a loan for the car you want.

Compare Club’s specialists can help with this.

When should I get pre-approved for a car loan?

Pre-approval usually lasts for a limited time, so it’s better to apply only when you’re ready to seriously start car shopping.

That way, you’ll have a month or so to find a car you like and apply for the full loan before your pre-approval offer expires.

By getting pre-approved for a car loan, you have an idea of what your budget is for your car and also means you don’t have to rely on financing at the dealership, where interest rates can often be higher.

Does pre-approval include a down payment?

Generally, no.

Lenders that offer pre-approval on car loans typically won’t ask for a down payment.

When you decide on the car you want, you can choose to pay for some of the cost out of pocket and borrow the rest.

Or you can borrow the full amount, depending on how much the lender is willing to loan you.

Does getting pre-approved for a car loan hurt your credit?

When you apply for pre-approval, the lender might request a copy of your credit report.

This gets recorded on your credit file but typically won’t affect your credit score.

Compare Club Car Loans runs a soft credit check to find what car loans meet your needs, but this won’t impact your credit score.

We only do a soft credit check so we can show you the appropriate loan that meets your financial circumstances.

A hard credit check will only be run after you submit your application to your chosen lender.

That’s why it’s helpful to compare car loans from multiple lenders before taking the plunge and applying.

By knowing how much you can borrow at what rate, you can avoid higher interest rates at the dealership and know what you’re getting into before you choose your car.

Compare Club can help you compare car loans without impacting your credit score.


Can you get pre-approved for a car loan without affecting credit?

Yes, as long as you don’t apply for multiple pre-approvals at the same time or over a short period, it shouldn’t affect your credit score.

Comparing car loans with Compare Club won’t affect your credit score either.

Do they run your credit again after pre-approval?

If you choose to apply for a full car loan after pre-approval, it will result in a “hard” credit check.

This can affect your credit score positively if you’re approved, or negatively if you’re denied.

Not all lenders offer pre-approval on car loans, but if you’re thinking about buying a car it’s worth looking at different options to find a loan that’s going to save you money in repayments over several years.

With Compare Club, you can compare loans from multiple lenders side-by-side without impacting your credit score – and apply in just a few minutes.

Click below to get started.


This guide is opinion only and should not be taken as financial advice. Check with a financial professional before making any decisions.

Compare Club has partnered with CarClarity, Australian Credit License 478 874.

CarClarity has commercial relationships with over 30 car finance lenders & has access to over 1000 car finance plans, however, does not compare all car finance offers in market. Availability of lenders and products can vary dependent on the individual’s personal credit history and circumstances. CarClarity & Compare Club may receive a commission from the lender to provide this service.