Get Preapproval Before Going To The Dealership

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Arranging your financing before arriving at the dealership can help you save money on your auto loan. It gives you time to explore financing options and research the best auto loan rates without pressure from sales staff. You can also negotiate from a stronger position when you arrive at the lot with a great deal in hand.

Why it’s better to get financing before going to the dealership

When you apply for a car loan before going to a dealer, you have a better chance of getting favorable loan terms, including more competitive rates.

You may qualify for more favorable terms

Dealerships shop your loan around to partner lenders or work with a captive finance company to provide you with a loan. A dealership may mark up its rate a few percentage points above the average auto loan rate for your credit range to get its cut of the financing. This is a big reason why getting outside financing before you visit the dealer saves you money. Essentially, you are receiving a wholesale rate from a lender rather than paying an extra fee for a middleman — the dealership.

Start with the bank or credit union you already have an account with. If you have an open account in good standing, it may offer you a relationship discount or more favorable terms.

You can avoid surprises

Your rates depend on your credit score and overall financial health. Knowing your score can help you estimate your rate. As the chart below shows, the higher your credit score is, the lower your loan rate will typically be. While the difference between the two rates might seem marginal, it could be a difference of hundreds or thousands of dollars over the life of your auto loan.

Source: Experian State of Automotive Finance Market, Q1 2025

A lender can use your income and credit score to estimate the rate and loan amount it is willing to offer you through a process called prequalification. Once you narrow your choices to three or four lenders, you can prequalify with them without impacting your credit score.

Using your prequalification offers, apply for preapproval with the lender you like best. Preapproval is a tentative approval of your auto loan. It is stronger than prequalification and offers specific loan terms (not estimates) of what the lender is ready to offer you. A preapproval will give you the most accurate sense of what your auto loan will cost.

You can preview your monthly payment

You can calculate your monthly payment based on the amount and rates you are preapproved for. This will allow you to find a monthly payment that works best for you based on different loan terms.

Many lenders offer terms between 24 and 72 months, although 84-month loan terms aren’t unheard of. That being said, a longer loan term may decrease your monthly payment, but you will end up paying more interest over the life of your loan.

It strengthens your negotiating position

Not only will having a preapproval offer help you find a vehicle that fits your budget, but it will also strengthen your negotiating position. A dealership’s finance office may be willing to beat your preapproval offer to lock in your business. In addition, it could help you negotiate the vehicle’s price or other terms of your loan.

Getting preapproved could also help you understand how much car you can afford. As a result, it can put you in a stronger position to resist a salesperson’s attempt to get you into a more expensive vehicle or to purchase unnecessary add-ons.

How to arrange auto financing in advance

To get the best auto loan rate, you will need to determine your budget and put in the time to research both your car options and the right lender for your finances.

1. Set your budget. You should always check your credit and calculate the monthly payment you can afford before you apply for any loan, including an auto loan.
2. Check your credit. Checking your credit score will give you a head start on knowing what rates you’ll qualify for and what lenders offer the best rates for your score range.
3. Prequalify with multiple lenders. Prequalifying for a loan lets you preview your rate. Many lenders offer prequalification without a hard credit check, which makes it easy to compare quotes.
4. Research your vehicle. Sources like Kelley Blue Book and Edmunds let you check average costs in your area. They can also help you estimate maintenance, fuel and car insurance costs to give you a better idea of your budget.
5. Lock in your rate. Once you’ve compared lenders and know the type of vehicle you want, apply for preapproval to lock in your rate. This will put you in a strong negotiating position at the dealership.
6. Check the dealer’s offer. While dealerships don’t offer the best rates in general, you may be able to negotiate a better rate. With a preapproval offer in hand, see if dealership financing beats your rate or has better terms.

Can you still get denied after preapproval?

Although getting preapproved can help you negotiate your rate and understand how much a lender may be willing to lend you, it doesn’t guarantee approval. A lender can still deny your loan if there is missing or incorrect documentation in your file or a significant change in your finances, before submitting a formal application, such as:

• A major drop in your credit score.
• Job loss or a significant reduction in income.
• Increased debt load.
• Making a large purchase.
• Unexplained deposits to your account.

To avoid a denial, review your credit report and correct any incorrect information at least 30 days before applying for your auto loan. You should also:

• Complete your paperwork honestly and accurately.
• Include all required documents such as bank statements and pay stubs.
• Refrain from opening new credit accounts.
• Avoid making large purchases.

What to do if you aren’t preapproved

If you are unable to get all your ducks in a row ahead of vehicle purchase, consider the following:

• Dealership financing. Often, dealership financing is one of the most accessible options if you have a bad credit score. Because dealers work with a wide variety of lenders, they may be able to find you financing even if you don’t qualify with more traditional lenders.
• Online dealers. Online dealers like Carvana are also more open to borrowers who don’t meet stricter eligibility criteria.
• Buy used. In general, opting for a used car rather than a new car will mean a more affordable monthly payment and a potentially lower interest rate, even if you don’t have the best credit.
• Delay your purchase. It may be better to wait if you don’t need a car in the immediate future. Interest rates can be extremely high if you have bad credit. And while you can always refinance your auto loan at a later date, taking the time to improve your credit now may mean scoring a lower rate out of the gate.

Bottom line

Most people benefit from arranging their auto loan financing before going to the dealership. To get started, check your credit score and review your monthly budget. Begin comparing cars and decide which models best fit your needs. From there, you can start comparing lenders to narrow down your most affordable options.