What a car loan preapproval is

You can finance a car through the dealer, which is called dealer-arranged or indirect financing, or go directly to a bank or credit union. The CFPB says that when you go directly, the first step is to get preapproved by a bank or other lender. The preapproval gives you a loan quote that includes an interest rate, a loan length and a maximum loan amount, based on a number of factors including your creditworthiness and the terms of the loan.

You do not have to work with the financial institution you bank with or are a member of, so you can shop around for different interest rates and loan terms. The quote lets you compare different offers, including with what a dealer may provide. See our guide on how to finance a used car for the full financing process.

From What are the different ways to buy or finance a car or vehicle? (Ask CFPB), read November 9, 2026.

How to get pre-approved, step by step

The CFPB suggests these steps before you visit a dealer:

• Check your credit reports and scores. Review your reports for errors or inaccuracies that may be affecting your scores, and dispute any errors to try to have them removed. You are entitled to free credit reports every 12 months from each of the three nationwide credit reporting companies: Equifax, Experian and TransUnion.
• Work out what you can afford. Look past the monthly payment to the interest rate and APR, taxes and fees, optional add-ons, and insurance and maintenance costs. See how much car can I afford.
• Get preapprovals from more than one lender before going to a dealer. This helps you compare offers and loan terms, and the CFPB says it could save hundreds or even thousands of dollars over the life of your loan.
• Keep your loan shopping to 14 to 45 days. Within that span, requests from lenders to check your credit generally count as one credit inquiry.
• Bring the quote with you. A preapproval from a bank or credit union lets you show other lenders or the dealership the rates you have been offered, with the goal of getting competitive offers.

From How will shopping for an auto loan affect my credit? (Ask CFPB), What should I know before I shop for a car or auto loan? (Ask CFPB), How much can I afford to borrow for a car or auto loan? (Ask CFPB) and What things can I negotiate when shopping for a car or auto loan? (Ask CFPB), read November 9, 2026.

Will getting pre-approved hurt my credit?

The CFPB says shopping for the best deal on an auto loan will generally have little to no impact on your credit scores, and the benefit of shopping far outweighs any impact. Here is how credit inquiries are generally counted:

From What kind of credit inquiry has no effect on my credit score? (Ask CFPB) and How will shopping for an auto loan affect my credit? (Ask CFPB), Consumer Financial Protection Bureau, read November 9, 2026.

What lenders look at

The CFPB says lenders generally use these factors to decide the interest rate and loan terms they offer you, and they are not required to offer you the best rates:

• Your credit scores and history
• Your income and debts
• The amount of the loan
• The loan term, or how long you will be paying the loan back
• The amount of your down payment in relation to the value of the vehicle
• The type of vehicle and whether it is new or used

From How does a lender decide what interest rate to offer me on an auto loan? (Ask CFPB), read November 9, 2026.

Comparing your preapproval with other offers

When you compare offers, the CFPB says to look at the amount of the loan, the APR and interest rate, the length of the loan and the monthly payment, not the monthly payment alone. A longer loan term may mean smaller monthly payments, but you will pay more in interest over the life of the loan. Our guide to APR vs. interest rate explains the difference.

The first quote you receive, whether from a dealership or a bank or credit union, may not be the lowest rate you qualify for. When negotiating, you can ask for a better rate or more favorable terms. If you use dealer-arranged financing, the CFPB notes the dealer will generally contact several lenders and present one offer, and you can ask whether there were other offers with lower rates or better terms.

From How do I compare auto loan offers? (Ask CFPB), What things can I negotiate when shopping for a car or auto loan? (Ask CFPB) and What are the different ways to buy or finance a car or vehicle? (Ask CFPB), read November 9, 2026.

Financing a used car at Elgin Auto Sales & Service Center

Shopping for your next vehicle? Browse our used inventory, see our financing options, start a finance application, or get a value with our trade-in form.

Our sales department at 1200 E. Chicago St. in Elgin is open Monday to Friday 9 a.m. to 7 p.m. and Saturday 9 a.m. to 6 p.m., and is closed Sunday. Get directions.