Do I Need a Pre-Approval to Buy a Car?

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Even with poor credit.

By

Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - September 8, 2020

You don’t need a pre-approval to buy a vehicle from a private seller or a dealership. However, a pre-approved auto loan can be very useful for many car buyers.

Pre-Approvals and Direct Auto Lenders

Pre-approvals come from direct auto lenders such as credit unions, banks, or some online lending services.

When you get approved for a car loan with a direct lender, you receive a check for the maximum amount you’re qualified to borrow. This is useful because you know your price ceiling, and are basically shopping as a cash buyer.

Other benefits of having a pre-approval include:

  • Knowing your exact price range. Since you already know exactly what you’re qualified to borrow, you can determine your entire car buying budget up front. Knowing your spending limit can also help you narrow down vehicles that much quicker.
  • Getting more attention from a dealer. Having a pre-approval in hand when you visit a dealership tells them that you’re ready to buy. Some dealers may not offer as much time to buyers who don’t look serious, or who look like they’re only window shopping.
  • Getting offered better rates at the dealership, and getting a better bargain as a result. Dealers are usually signed up with third-party and other direct lenders. Sometimes, the dealership’s finance department might offer you a lower interest rate than what you were pre-approved for to persuade you to finance with them.
  • Speeding up the whole process. You don’t have to apply with the dealer’s third-party lenders. Once you find a car, you give them the check and finalize all the other paperwork. Then, you can take delivery of your next vehicle – usually that same day.

While all of these benefits combine to make a great argument for finding a direct lender before you head to the dealership, it isn’t necessary. You don’t have to walk into a car lot with a check in hand. You have the option of going through the dealer’s finance department and exploring different rates.

Or, you can head to the dealership first, choose a vehicle, and then go to your direct lender. Some direct lenders might ask you what car you’re looking to buy, and simply pre-approve you for that vehicle’s selling price.

Whichever way you choose to do it, going through a direct lender is a common and great choice for borrowers with good credit. But if you have bad credit, getting a pre-approval may not be in the cards right now.

What if My Credit Isn’t Great?

For borrowers with lower credit scores, it can be more difficult to get that pre-approval. Many direct lenders have credit score requirements for you to be considered for an auto loan. This doesn’t mean that you’re out of luck just because you have a bad credit score and may not be able to get a pre-approval, though!

Like we mentioned, there are dealers that are signed up with third-party lenders. Some of them are signed up with bad credit third-party lenders, called subprime lenders. If you get ahold of a dealership that’s signed up with subprime lenders, you work with their special finance manager during the car buying process instead of the actual lender.

Subprime lenders consider more than just your credit score, and have requirements for income, work history, and other factors direct lenders may not take into account when considering you for an auto loan pre-approval. Subprime lenders are equipped to assist credit-challenged borrowers who’ve been through bankruptcy, had a past vehicle repossession, or have simply had some credit-related bumps in the road.

Need a Dealership With Bad Credit Resources?

Having bad credit can make car shopping a chore, an annoyance, or just straight up discouraging. It doesn’t have to, though!

Here at CarsDirect, we’ve cultivated a network of special finance dealerships that spans the country. Instead of driving all over town hoping you can find a dealer that’s signed up with subprime lenders, start right here.

Complete our free auto loan request form and we’ll begin the search and look for dealerships in your area.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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