Does it make more sense to get pre-approved for a car loan before you look for the right vehicle? The answer can depend on your credit score. We cover how pre-approvals can be advantageous, and how getting your auto loan first isn’t necessary, or sometimes even possible, with bad credit.

Direct Lenders and Car Loans

Getting a car loan isn’t always as easy as 1-2-3. Some borrowers struggle with deciding what lender to go with, and whether or not they should get a pre-approval before picking out a vehicle from a dealer’s lot.

If you want a pre-approval, you need to find a direct auto lender. They are found in banks, credit unions, and online. They’re called direct lenders because you apply directly with them, and often, you can meet your lender in person. If you’re given the green light, they usually hand you a check for the amount you’re pre-approved for and then you can purchase a car from a private seller or dealership.

You don’t need to go to a dealer with a pre-approval in hand, since you can choose to work with a third-party lender that’s signed up with the dealership, but they still have benefits to consider.

Benefits of Auto Loan Pre-Approvals

Getting a pre-approval from a direct lender can be a great move. A few reasons to get approved for your auto loan first include:

  • Should You Get the Car Loan Before the Car?A bargaining chip. A pre-approval in hand can mean getting offered better interest rates by the third-party lenders that are signed up with the dealer. They'd prefer you to finance with them, so they may be willing to go the extra mile to make that happen.
  • Establishing your spending cap right away. Once you have a pre-approval, you know how much you can spend. If you start with a dealership first, you may fall in love with a vehicle only to find that you need more money down or you don’t qualify for enough of a car loan. Pre-approvals can help you shop within your means.
  • Financing is already taken care of. When you start researching what vehicles you want, that lingering question of “can I get financed?” can cause stress. If you get a pre-approval beforehand, you can enjoy the car shopping and research process a little more since the auto financing is already done.

All of these reasons can be enough for borrowers to rush out of the door and to their local credit union or bank for a car loan pre-approval – but how is your credit score?

Borrowers with poor credit often struggle to get a pre-approval from a direct lender because they can have high credit score requirements. Borrowers with credit scores below around 660 may find themselves getting turned down for financing, even with the income to pay for the vehicle.

Bad Credit and Car Loans

The subprime auto loan process is different, but you don’t need a pre-approval to get into a car loan. Since a bad credit score could be the sole reason for denial, remember that you also have the option to look for an auto lender that’s signed up with a dealer.

When you have poor credit, heading to your local bank and getting approved for a car loan may not be that easy. If you’re struggling with credit issues, heading to a special finance dealership may improve your chances of getting approved for an auto loan.

Special finance dealers are signed up with subprime lenders, and these lenders work with borrowers who have less than perfect credit. Instead of just looking at your credit reports to determine your ability to take on new credit, they look at your income, living situation, and your overall stability.

If you’re approved for financing with a subprime lender, you’re given a maximum vehicle payment you qualify for. From there, you can choose a car on the dealership's lot that fits within that payment range.

Finding the Dealership for Your Credit

With a lower credit score, it’s not always easy to find a lender that can work with you. Here at Auto Credit Express, we want to make that easier.

We’ve cultivated a network of special finance dealers over the last 20 years, and we match bad credit borrowers to dealerships with the lending resources they need. For no cost and no obligation, we’ll look for a dealer in your area after you complete our auto loan request form.