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What does preapproval from a car dealership mean?
The car salesman at my local dealership keeps preaching about preapproval and that I should get it before shopping. What does this mean?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Preapproval for a
car loan
is a conditional approval for a future loan, which can make shopping for a car way easier in terms of budgeting and negotiation.To get preapproval, you apply with lenders just as you would with a traditional car loan. The lender looks at your income, credit score, and debt-to-income ratio to determine how much they will approve, as well as the terms and interest rates of your potential car loan.
While you can seek preapproval at the dealership, you should also search around for other rates with banks, credit unions, and online lenders.
Some of the benefits of getting preapproval include:
- Budgeting for a car within your means
- Better negotiating power since you’re only allowed to spend a certain amount
- Focusing more on the purchase and what type of car you want rather than worrying about financing
Following car loan preapproval, you still need to shop for one more item other than your car: insurance. Every lender will require full coverage car insurance, so that’s when you can use
Jerry
to compare quotes. Sign up in minutes to search quotes from over 50 reputable carriers.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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