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Car finance ›
What does pre-approved car finance mean?
Updated: Thursday, 7 December 2023
If you’re considering purchasing a new or used car, you might have heard the term ‘pre-approved car finance’. But what does it really mean, and what does it involve?
In this article, we explain what it means to be pre-approved for car finance to help you understand how it might affect your next car purchase.
What is pre-approved car finance?
Pre-approved car finance is the initial stage in the car finance application process. It is when a lender evaluates your eligibility for finance and provides you with an initial approval or approval in principle. They do this by looking at your credit history, affordability, and other factors before providing you with a conditional offer for a finance agreement.
Pre-approving car finance applications is how lenders give prospective borrowers an indication that they will be able to approve a formal application for finance.
Getting pre-approved for car finance can be helpful when you’re considering purchasing a vehicle, as it allows you to know roughly how much you can afford to spend on a car before visiting dealerships. Pre-approved finance agreements will also detail your interest rate and repayment term so you know what your agreement could look like.
How does car finance pre-approval work?
To get pre-approved for car finance, you’ll need to complete an online quote form. You’ll be asked for some personal information and details about your current financial situation. Using this, lenders will go through the following process:
If you’re considering purchasing a new or used car, you might have heard the term ‘pre-approved car finance’. But what does it really mean, and what does it involve?
In this article, we explain what it means to be pre-approved for car finance to help you understand how it might affect your next car purchase.
What is pre-approved car finance?
Pre-approved car finance is the initial stage in the car finance application process. It is when a lender evaluates your eligibility for finance and provides you with an initial approval or approval in principle. They do this by looking at your credit history, affordability, and other factors before providing you with a conditional offer for a finance agreement.
Pre-approving car finance applications is how lenders give prospective borrowers an indication that they will be able to approve a formal application for finance.
Getting pre-approved for car finance can be helpful when you’re considering purchasing a vehicle, as it allows you to know roughly how much you can afford to spend on a car before visiting dealerships. Pre-approved finance agreements will also detail your interest rate and repayment term so you know what your agreement could look like.
How does car finance pre-approval work?
To get pre-approved for car finance, you’ll need to complete an online quote form. You’ll be asked for some personal information and details about your current financial situation. Using this, lenders will go through the following process:
The lender will carry out a credit check on your credit file. This will help them determine whether you are eligible for finance and, if so, how much you might be able to borrow and under what terms.
We use a soft credit check at the point of application, which doesn’t affect your credit score, and gives you an immediate decision.
If you meet the finance company’s lending criteria, they will provide you with a pre-approved offer. This will state the in-principle loan amount, your personal APR, and the repayment term.
It may also detail any conditions or requirements you need to meet, such as making an initial deposit.
Upon receiving your pre-approved finance agreement, you can begin shopping around for potential cars to purchase.
Going to dealerships or browsing online with a clear idea of what you can afford makes it much easier to find the right vehicle.
Once you have chosen a car, your lender will finalise the approval. At this point, contracts will be drawn up for you to sign.
A hard check will be made on your credit file and documents will be finalised, so the lender can pay the dealership, and you can collect your new car.
The lender will carry out a credit check on your credit file. This will help them determine whether you are eligible for finance and, if so, how much you might be able to borrow and under what terms.
We use a soft credit check at the point of application, which doesn’t affect your credit score, and gives you an immediate decision.
If you meet the finance company’s lending criteria, they will provide you with a pre-approved offer. This will state the in-principle loan amount, your personal APR, and the repayment term.
It may also detail any conditions or requirements you need to meet, such as making an initial deposit.
Upon receiving your pre-approved finance agreement, you can begin shopping around for potential cars to purchase.
Going to dealerships or browsing online with a clear idea of what you can afford makes it much easier to find the right vehicle.
Once you have chosen a car, your lender will finalise the approval. At this point, contracts will be drawn up for you to sign.
A hard check will be made on your credit file and documents will be finalised, so the lender can pay the dealership, and you can collect your new car.
Learn more about what you’ll need to apply for car finance.
Does pre-approval guarantee car finance?
While pre-approval is a significant step in the car finance application process, it does not guarantee that you will ultimately be approved for finance.
The pre-approval offer is based on the information available at that time. It is subject to final approval once you’ve selected a specific vehicle and contracts are drawn up for you to sign.
It’s important to know that our quotes last for 30 days. We can’t speak for other lenders as every company has different processes and timescales.
Can anyone get pre-approved for car finance?
Whether you will be approved for car finance depends on your personal circumstances. Different lenders have varying criteria, so if you have bad credit, it can be tough to get approved. It doesn’t make it impossible; it just means you might have to use a specialist bad credit car finance lender.
If you’re at all concerned about your credit score, then check out our guide on what is a bad credit score for more information.
Why should you get pre-approved for car finance?
There are many advantages for getting pre-approved for car finance, including:
- Faster process: vehicle finance pre-approval streamlines the financing process, making it faster when you find the right car.
- Financial peace of mind: buying a new vehicle can be a big decision, so having a pre-approved finance agreement in place can provide reassurance that you can borrow the money you need.
- Bargaining power: sellers may be more willing to negotiate when they know you’re a serious buyer with pre-approved financing.
Overall, being pre-approved for finance gives you peace of mind. You can browse potential vehicles with a budget in mind, and the lender will be able to help find the right one for you.
Pre-approval vs. final approval: what's the difference?
It’s important to distinguish between pre-approval and final approval in the car finance process.
Learn more about what you’ll need to apply for car finance.
Does pre-approval guarantee car finance?
While pre-approval is a significant step in the car finance application process, it does not guarantee that you will ultimately be approved for finance.
The pre-approval offer is based on the information available at that time. It is subject to final approval once you’ve selected a specific vehicle and contracts are drawn up for you to sign.
It’s important to know that our quotes last for 30 days. We can’t speak for other lenders as every company has different processes and timescales.
Can anyone get pre-approved for car finance?
Whether you will be approved for car finance depends on your personal circumstances. Different lenders have varying criteria, so if you have bad credit, it can be tough to get approved. It doesn’t make it impossible; it just means you might have to use a specialist bad credit car finance lender.
If you’re at all concerned about your credit score, then check out our guide on what is a bad credit score for more information.
Why should you get pre-approved for car finance?
There are many advantages for getting pre-approved for car finance, including:
- Faster process: vehicle finance pre-approval streamlines the financing process, making it faster when you find the right car.
- Financial peace of mind: buying a new vehicle can be a big decision, so having a pre-approved finance agreement in place can provide reassurance that you can borrow the money you need.
- Bargaining power: sellers may be more willing to negotiate when they know you’re a serious buyer with pre-approved financing.
Overall, being pre-approved for finance gives you peace of mind. You can browse potential vehicles with a budget in mind, and the lender will be able to help find the right one for you.
Pre-approval vs. final approval: what's the difference?
It’s important to distinguish between pre-approval and final approval in the car finance process.
Pre-approval
Pre-approval refers to being approved or approved in principle after getting a quote for car finance. After getting pre-approved with us, you’ll be shown what your agreement could look like. If you’re approved, you’ll be able to browse for cars straight away using our vehicle finder tool.
If you’re approved in principle, we’ll just need a few more documents to support your application. An expert from our team will be in touch to help guide you along the process.
Final approval
The final approval is the crucial stage where the lender conducts a more comprehensive review of your financial situation and affordability.
At this point, you’ve likely chosen a specific vehicle, and the finance company will need to confirm that the car you intend to purchase aligns with their lending criteria.
Any changes in your credit profile, income, or financial circumstances since your pre-approved car finance offer may affect the final approval decision. The lender will use a hard check to provide you with a final quote, and contracts will be drawn up for you to sign.
Pre-approval
Pre-approval refers to being approved or approved in principle after getting a quote for car finance. After getting pre-approved with us, you’ll be shown what your agreement could look like. If you’re approved, you’ll be able to browse for cars straight away using our vehicle finder tool.
If you’re approved in principle, we’ll just need a few more documents to support your application. An expert from our team will be in touch to help guide you along the process.
Final approval
The final approval is the crucial stage where the lender conducts a more comprehensive review of your financial situation and affordability.
At this point, you’ve likely chosen a specific vehicle, and the finance company will need to confirm that the car you intend to purchase aligns with their lending criteria.
Any changes in your credit profile, income, or financial circumstances since your pre-approved car finance offer may affect the final approval decision. The lender will use a hard check to provide you with a final quote, and contracts will be drawn up for you to sign.
Do pre-approvals for car finance affect your credit score?
It depends on the type of credit check the lender makes when you apply. We use a soft check which doesn’t affect your credit score, but some lenders use a hard check straight away. Hard checks do leave a mark on your credit score and may cause a small dip.
We only use a hard check when you’ve decided to enter into an agreement with us, and contracts are drawn up for you to sign.
Learn more about what credit scores are and how to check your credit score.
Get your new car with Moneybarn
We’re proud to have over 30 years of experience helping people up and down the UK with car finance. We offer a Conditional Sale agreement, which means you own the car once you make your final payment, without paying any extra fees.
We use a soft search at the point of application, which doesn’t affect your credit score. We only run a hard search once you’ve decided you’d like an agreement with us. As a vehicle finance company that wants to help all its customers onto a better road ahead, we accept applications when other lenders might not.
Get a quote today in less than 5 minutes and see if we can help you.
FAQs about car finance pre-approval
Can you get declined after a car finance pre-approval?
Yes, it’s possible. Pre-approval is not a guarantee of final approval. Your lender will re-evaluate your application after you’ve chosen a specific vehicle and may change their decision. Find out more about why you may have been declined for car finance.
Why would I not get accepted for car finance?
There are several reasons why you might not get approved for car finance. You might not fit the lender’s criteria, or something may have changed between when you submitted an application and when the hard credit check is made.
Learn more about how to increase your chances of getting car finance.
What is in a credit report?
A credit report summarises your credit history, including the types of credit accounts you’ve had, your payment history and certain other information, such as your credit limits. The main providers of credit reports in the UK are Experian, Equifax, and TransUnion.
What is a pre-approved loan?
A pre-approved loan is a financial product offered on a provisional basis by banks, credit unions, or other lending institutions. When you’re pre-approved for a loan, it means the lender has reviewed your financial information and creditworthiness and has determined that you are eligible for a loan of a specific amount and under certain terms and conditions.
Being pre-approved for a loan means that there is a high chance that the lender will approve your formal application, but there are no guarantees. You will need to pass a hard credit check in order to be accepted.
Do pre-approvals for car finance affect your credit score?
It depends on the type of credit check the lender makes when you apply. We use a soft check which doesn’t affect your credit score, but some lenders use a hard check straight away. Hard checks do leave a mark on your credit score and may cause a small dip.
We only use a hard check when you’ve decided to enter into an agreement with us, and contracts are drawn up for you to sign.
Learn more about what credit scores are and how to check your credit score.
Get your new car with Moneybarn
We’re proud to have over 30 years of experience helping people up and down the UK with car finance. We offer a Conditional Sale agreement, which means you own the car once you make your final payment, without paying any extra fees.
We use a soft search at the point of application, which doesn’t affect your credit score. We only run a hard search once you’ve decided you’d like an agreement with us. As a vehicle finance company that wants to help all its customers onto a better road ahead, we accept applications when other lenders might not.
Get a quote today in less than 5 minutes and see if we can help you.
FAQs about car finance pre-approval
Can you get declined after a car finance pre-approval?
Yes, it’s possible. Pre-approval is not a guarantee of final approval. Your lender will re-evaluate your application after you’ve chosen a specific vehicle and may change their decision. Find out more about why you may have been declined for car finance.
Why would I not get accepted for car finance?
There are several reasons why you might not get approved for car finance. You might not fit the lender’s criteria, or something may have changed between when you submitted an application and when the hard credit check is made.
Learn more about how to increase your chances of getting car finance.
What is in a credit report?
A credit report summarises your credit history, including the types of credit accounts you’ve had, your payment history and certain other information, such as your credit limits. The main providers of credit reports in the UK are Experian, Equifax, and TransUnion.
What is a pre-approved loan?
A pre-approved loan is a financial product offered on a provisional basis by banks, credit unions, or other lending institutions. When you’re pre-approved for a loan, it means the lender has reviewed your financial information and creditworthiness and has determined that you are eligible for a loan of a specific amount and under certain terms and conditions.
Being pre-approved for a loan means that there is a high chance that the lender will approve your formal application, but there are no guarantees. You will need to pass a hard credit check in order to be accepted.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
