The car loan application process can be a pretty quick one, but going in blind without any idea of your budget or interest rate might make things more difficult for you. That’s why lenders offer pre-approval on their loans. Having a clearer understanding of your borrowing power means you can look around for cars you know you can afford before you press ahead with your formal application.
What is car loan pre-approval?
Car loan pre-approval (also known as conditional approval) is a preliminary, non-binding finance offer. It gives you an idea of how much you can borrow and at what rates, based on your current financial profile. Pre-approval sets a clear budget, strengthens your negotiating position with sellers, and lets you shop with confidence.
It’s important to note that the amount you’re pre-approved for and the interest rate you’re offered aren’t final or legally binding. Pre-approval is no guarantee of car loan approval. If your financial situation or your employment changes, your car loan eligibility is likely to change with it.
How long does car loan pre-approval last?
Depending on the lender, pre-approval usually lasts between 30 and 90 days. This gives car buyers ample time to shop around and find a car that fits their budget. Your broker or lender will let you know how long it’s valid for when you’re pre-approved. Re-applying for pre-approval repeatedly could have a negative impact on your credit score, though.
How to get car loan pre-approval with Savvy
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Fill out our online quote form
First, tell us about yourself and the amount you’re looking for to buy your car.
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Complete our application process
If you’re ready to press on, you can formally apply straight away. Otherwise, we’ll give you a call and speak about your situation.
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Supply any necessary documents
We’ll need to look over some documents to verify your profile, such as payslips and ID.
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Speak to your car finance broker
Once we have everything we need, your broker will call you to talk about the best finance options available on our panel.
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Receive pre-approval
From there, we can help you obtain pre-approval so you can start looking around for your ideal wheels.
Why apply for a car loan with Savvy?
Fast & easy application
Apply online and submit and sign all your documents digitally. We can assess your profile with a soft credit check, so your score isn't impacted.
Trusted since 2010
With 15+ years of experience and a 4.9-star customer service rating on Feefo, we've helped thousands of Aussies find their ideal car loan.
Unbeatable rates & choices
Access 40+ lending partners nationwide. We compare providers to find the most competitive interest rates tailored to your profile.
What to do before applying for car loan pre-approval
Before applying for a pre-approval car loan, you should:
- Look at your credit score and history: get a copy of your credit report from one of the major reporting bodies (Equifax, illion and Experian in Australia). Address any errors and work on improving your credit score. The better your credit score is, the better your chance of approval and getting a lower interest rate.
- Shortlist potential cars: decide on the type of car you want to purchase. Consider factors such as make, model, age, mileage and features to ensure it fits within your budget and meets your needs.
- Plan for extra costs: consider additional costs that come with buying a car, like motor vehicle duty, car registration, car insurance and maintenance costs.
Does car loan pre-approval affect my credit score?
When lenders assess your application for pre-approval, they usually will check your credit, which shows up on your file. This can have a small effect on your credit score, though this isn’t much to worry about. Applying repeatedly with different lenders for any loan will have a more pronounced negative impact on your score, though, so only apply when it’s absolutely necessary.
"Many people focus on getting the lowest interest rate, but that's only half the story. A loan with fewer fees, flexible repayment options or no early exit penalties can often save you more in the long run. Don't just ask 'what's the rate?'; find out what the total cost of the car loan will be over its life."
Why pre-approval is so important for your car loan
The pros and cons of car loan pre-approval
Pros
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Lets you know your budget
Receiving pre-approval from your lender allows you to shop around with a clear idea of how much you can spend on your new or used car.
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Gives an idea of interest rate
It isn’t just borrowing power, though. Receiving an indicative interest rate allows you to work out what your weekly, fortnightly or monthly car payments might be.
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A valuable bargaining tool for car prices
Pre-approval provides something of a price ceiling for your car, strengthening your hand when negotiating with sellers. You’ll also be seen as a more serious potential buyer.
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Can help you hit the ground running when you find your car
If you find your car and want to apply with the same lender you received pre-approval from, the process may be quicker.
Cons
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No guarantees
Pre-approval doesn’t guarantee formal approval, so what your lender is willing to offer conditionally may be different to what you receive when you formally apply.
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Can negatively impact your score with too many applications
You shouldn’t apply too often, or it could start to affect your credit score and chances of formal approval for the amount you want.
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Has an expiry date
If you want to maintain your pre-approval for a long time, you’ll need to renew it every one to three months.
What happens after pre-approval?
After being pre-approved for your car loan, the next steps typically involve finalising the loan application and completing the purchase process. Here’s what you need to do when applying with Savvy:
- Choose your vehicle: you can start shopping for your car, ensuring it fits within your budget.
- Complete the loan application: give your broker the all-clear to proceed with your application. They’ll move ahead with your deal, prepare your application and submit it on your behalf.
- Receive formal approval: you can be formally approved as soon as within one business day of applying for a car loan.
- Review and sign the loan documents: we’ll provide you with the loan documents to review and sign. Take the time to read through all the terms and conditions carefully before submitting them electronically. We’ll handle the settlement of the loan for you.
- Close the deal: once everything is signed off, you can hit the road in your new or used car!
Is car loan pre-approval worth it?
Yes – pre-approval is beneficial for a wide range of car shoppers looking to finance their vehicle purchase. It’s especially useful for:
- First-time buyers: pre-approval provides you with a clear understanding of your budget and financing options upfront, helping you make informed decisions.
- Budget-conscious buyers: determining how much you can afford to borrow and setting a realistic budget out the gate is crucial. This helps ensure that you don't overspend or stretch yourself financially.
- Buyers with credit concerns: pre-approval allows you to explore loan options from multiple lenders, helping you find a loan with favourable terms.
- Proactive buyers: this process is well-suited to buyers who prefer to plan ahead and have all their financial arrangements in place before making their purchase. There’s no need for a last-minute scramble when you’re pre-approved.