Car Loan Pre-Approval

Gain buyer confidence with competitive car loan pre-approval from Savvy.

No obligation. It won't affect your credit score.
Written by 
Savvy Editorial Team
Savvy's content writing team are professionals with a wide and diverse range of industry experience and topic knowledge. We write across a broad spectrum of finance-related topics to provide our readers with informative resources to help them learn more about a certain area or enable them to decide on which product is best for their needs with careful comparison. Meet the team behind the operation here. Visit our authors page to meet Savvy's expert writing team, committed to delivering informative and engaging content to help you make informed financial decisions.
Our authors
, updated on September 12th, 2023       

Fact checked

At Savvy, we are committed to providing accurate information. Our content undergoes a rigorous process of fact-checking before it is published. Learn more about our editorial policy.

What is car loan pre-approval?

Buying cars from private sellers with pre-approval

Car loan pre-approval is an “in principle” approval from a lender that allows you to borrow a set amount of money before purchasing a vehicle. The money is not lent to you immediately; you must purchase a car for the transfer to occur. In effect, your loan is kept on “standby” until you find the car that suits your needs. Car loan pre-approval also gives you a “price ceiling” that can help you with negotiating better prices.

Buying cars from a private seller can often be a good way to save money. Private sales means cars may be in relatively good condition despite their age and are cheaper as the seller does not have to charge a premium for commissions and overheads. Lenders often give would-be buyers car loan pre-approval for private sales and even auction sales.

This gives you more bargaining power with potential sellers, which we explain in detail below.

Car Loan Banner

Why choose Savvy for your car loan?

Car loan pre-approvals explained further

How car loan pre-approval works

Car loan pre-approval works in much the same way as any type of personal finance approval. A prospective buyer will have to approach a lender or broker and apply for finance. The buyer will need to consent to credit checks, supply employment or financial information, and other documentation to verify their identity.

The crucial difference is that you are not given the money immediately – you are given conditional approval or “pre-approval” for a short amount of time – weeks or up to a month or so.

Lender pre-approval is not as common as standard car loans and may not be available for bad credit customers.

Using an accredited and qualified broker can help you find lenders who offer pre-approvals on car loans with competitive rates.

How car loan pre-approval gives you a leg up on negotiation?

Are you looking for finance to buy Honda? Perhaps you're on the lookout for a Honda Civic – either a brand new 2021 model right off the showroom floor, or a well-maintained older model without too many numbers on the odometer. Or perhaps you just know Honda to be a reliable brand, and you're not too worried about the model.

Either way, Savvy can help you secure the finance to make it happen. With more than a decade in the finance industry and thousands of satisfied customers behind us, our expert team are willing and able to help you find the best car loans for your situation, and get you on the road in the Honda of your choice.

What you need to do before buying?

Before applying for a pre-approval car loan, you should have already done your homework when it comes to the type of car you are looking for. You should have narrowed down your choices to the type (SUV, sedan, hatch, etc.), make, model, and if applicable, year of manufacture. Before looking at cars in a showroom or online, you should already have a shortlist. This can help you avoid disappointment if your “dream” car is out of your price range or unavailable.

After pre-approval, you may have to temper your expectations. For example, your desired car may cost $55,000 but you have only been pre-approved for $45,000. While it’s possible to talk a dealer or private seller down to that price, you must be prepared for a “no.” Sometimes a “price floor” is as non-negotiable as a “price ceiling.”

You should test drive any vehicle you intend to purchase to find out if there are any obvious issues. If looking at privately sold cars, you may want to get an independent assessor to look at the car and/or look up the car’s VIN on the Personal Property Securities Register (PPSR) to avoid buying write-offs or stolen vehicles (though rare, it never hurts to look at the details.)

How to improve your chances of pre-approval for a car loan?

Your pre-approved car loan questions answered

What is car loan pre-approval?

Car loan pre-approval, also known as conditional car loan approval, is an in-principle agreement on the part of a lender to lend money to a borrower in the event they purchase a vehicle. The money is only transferred when the vehicle is purchased.

Can people with bad credit get car loan pre-approval?

This depends on the lender. Some specialist lenders offer pre-approval to bad credit customers. Talk to one of our consultants for more information.

What is a comparison rate?

A comparison rate is an interest rate that includes most fees and charges expressed as a percentage per annum. This paints a clearer picture of how much the loan costs over time.

Can I get pre-approval for used or privately sold cars?

Yes. Some lenders will grant pre-approval for car loans for used or privately sold vehicles, or vehicles sold at auction.

What is the advantage of car loan pre-approval?

The main advantage of car loan pre-approval is confidence in your buying power. You and your seller will have a clear idea of how much you can spend and will need to negotiate within those boundaries. This can have a positive effect on settling on a price.

What happens when I buy a car?

Borrowers with pre-approval will need to contact their bank or lender to begin funds transfer and settlement of the deal. This is completed once terms have been struck and documents are ready to be transferred.

Apart from the pre-approval, what other differences should I look out for?

Most pre-approved car loans function like post-approved (i.e. loans approved after the car is purchased); you can opt for fixed or variable rates; secured or unsecured loans; loan terms of 12 months to 7 years; balloon payments; and other facilities. Conditions may apply.

Helpful guides on car loans

Top 5 cars for tradies

1. Ford Ranger A dual cab ute carrying the spirit of the big US ‘pick-up truck’ is a capable 3.2L Diesel Turbo 5 4WD that’s pushed along by 147kw and...

5 tips to secure a great used car deal

Know what you want Before you go out to buy anything, you need to know what you’re interested in purchasing, right? Right. That’s why the first tip is to figure...

5 ways to make your old car feel new

So, what do you do when your car seems to be worn out? Luckily, there are ways to make your car appear neat and polished, and give it that new...

Sales of SUVs in Australia have increased in 2021

What large SUV should I buy?

Mazda CX-9 Luxury AWD The Mazda entry is undoubtedly the priciest, but really does earn its luxury tag. It has a 5.8” LCD display in 100% colour, CD stereo, Bluetooth...

Car Loan Approval Time

How does a car loan work? Get a quote You can get a quote from an online broker, comparison sites, direct lenders and banks. Usually a broker will have access...

Your checklist when buying a demo car

History of the car Before making your purchase, you should discuss the history of the car with the dealer. How often was the car used? The car might have technical issues if...

457 visa car loans

Car Finance for 457 Visa holders

What can I do? As a 457-visa holder, there are some options available to you. They come with some conditions, but they are a viable option to get you behind the wheel...

Guide to buying your first car

What kind of plates do you have? First thing to look at is what kind of P-plates you have. Probationary plates are on graduated schemes in many states of Australia,...