Equipment Finance, Asset Finance, Lease Financing
January 9, 20170

Pre-approval – Want to know exactly how much bargaining power you have when searching for a car? A pre-approved car loan can put you in the driver’s seat.

Posted by:iloveloans onJanuary 9, 2017

If you’re looking for finance to help you buy a car, the usual car-buying process involves you finding a car, then applying for a loan to help you buy it. Pre-approval is available before you head for the car dealership so you can head there knowing how much you’re approved for. Find out everything you need to know about pre-approval, and contact us to compare some of your options.

The ins and outs of pre-approved car finance

When you apply for pre-approval, your financial circumstances will be evaluated and the lender will determine how much you can afford to borrow. During the process you’ll need to provide similar details as you would provide a normal loan. It’s important to note that pre-approvals are only valid for a short space of time.

A huge benefit to a pre-approved car loan is it gives you an advantage when you need to negotiate the price of a vehicle. You know how much you can spend, so you can make an offer there and then. However, this means you also means you know your budget limitations, so if the salesperson can’t meet your negotiations you’ll have to walk away.

What is conditional approval?

Conditional approval is given when you’re initially approved for a pre-approved car loan. Based on the details you provided during the pre-approval process, the lender says you can borrow up to a certain amount.

Unconditional approval is when the lender approves you for the loan to buy a specific vehicle. Lenders have restrictions with the types of vehicles they will finance, so need to be sure that the car fits within these restrictions before giving the final green light.

How to get pre-approved for a car loan

  1. Get a copy of your credit file
  2. Ensure you have all your documents and pay slips
  3. Contact your broker when you wish to apply for the pre-approval
  4. Once pre-approved, shop around for your next car

What types of car sales can I use with a pre-approved car loan?

Pre-approved car loans can be used to purchase cars bought through a dealership, at private sales and at auction. These are all the types of situations you can expect to use a regular car loan for. So in that regard, pre-approved car loans serve the same purposes as regular car loans.

The type of vehicle, age and whether purchased privately or through a dealer (new or second hand) needs to be advised at the time of pre-approval.

Have you weighed up the benefits and drawbacks of pre-approval?

  • Buyer confidence.Pre-approved car loans give buyers confidence that they have a good chance of getting finance for their chosen car.
  • Understanding of your financial situation.The lender has already assessed your financials and has confirmed that you can afford the loan and therefore the car purchase, before you go out and buy it.
  • Bargaining power.Pre-approval can give you the upper-hand when negotiating your price at the car dealership.
  • Shorter periods of time.Conditional approval on some loans is only available for short periods of time.
  • Limited choice.There aren’t as widae a variety of lenders who offer pre-approval as who offer car loans, so you have limited choice.

Pre-approved car loan features

Like the best features on the market? You can get some of the best features and interest rates on the market with pre-approved car loans.

  • Secure against your vehicle.Interest rates are lower on car loans that are secured, saving you money and keeping your repayments manageable.
  • Choice of fixed or variable interest rates.Keep your repayments the same each months or take advantage of the flexibility of a variable rate loan.
  • Up to seven-year loan terms.Longer loan terms can help make the regular payments more affordable. Fixed rate loans may only come with maximum loan terms of up to five years.
  • Weekly, fortnightly and monthly payment options.This differs among lenders, but you’ll usually have the choice of weekly, fortnightly or monthly repayments.
  • Extra repayments & redraw.Variable pre-approved car loans can allow borrowers to make fee-free additional repayments and redraw to suit ever changing finance needs.

Things to consider before applying for pre-approval

There’s probably a few things you should do before buying a car, and these will vary from person to person. Here’s a few things to keep in mind.

  • Research your car. The make. The model. The year. The colour. You’ll also need to take into consideration the fuel consumption.
  • Check your financial standing.Car loans are an extensive financial commitment. Ensure that you have the required funds and/or pre-approval.
  • Test-drive your car.Taking the car for a test-drive will let you find out if there is any issues with it.
  • Shop around.Your next car may be at several dealers — it could be a good idea to not to buy the first car you see.

How do I apply for a pre-approved car loan?

Contact us to see if you qualify for a pre-approved car loan.

Please have your information handy such as your income, employment details, other income, assets, liabilities and 100 points of ID.

About your next car loan

Have more questions about pre-approval?

You asked and we listened. Here are the top questions you’ve had about getting pre-approval on your next car loan

Should I get a new or used car?

As with any large purchase, it’s important to compare your options. You should choose a car based on the features you want, and then pick one in your budget. There are benefits and drawbacks to both new and used car purchases, for instance, used cars can be a bargain but can come with unknown mechanical problems, while new cars come with a factory warranty but depreciate quickly.

Take a look at our used car buying guide here to get an idea of what might be in store.

Are there any extra costs I should be worried about?

  • Stamp Duty.The government requires you to pay stamp duty on your car which will be a percentage of the purchase price.
  • Compulsory Third Party Insurance.This is a legal requirement in Australia and covers anyone who may get hurt as a result of your driving.
  • Not mandatory in Australia, but any extra insurance could protect your car.
  • Ongoing costs.You’ll have to pay for the ongoing upkeep of your next car including servicing, tolls, etc.

Who can actually get pre-approval?

You’ll have to be 18+ and a permanent resident or citizen, have a job and a regular income and be able to afford your loan repayments.

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