You do not necessarily need to have chosen a specific car before starting the finance process. Depending on the lender, you may be able to investigate finance or obtain conditional pre-approval before you go car shopping. This can give you a clearer idea of your budget and finance options, but it does not mean that every vehicle you find will automatically be approved for funding.
Key takeaways
- ✓It may be possible to arrange conditional car-finance pre-approval before choosing a specific vehicle.
- ✓Consumer Protection recommends understanding your budget and trying to sort out finance before buying a car.
- ✓Pre-approval is not necessarily the same as final loan approval.
- ✓The lender may still need to approve the particular vehicle and transaction.
- ✓Knowing your approximate finance position can help you shop within a more realistic price range.
- ✓Compare the actual interest rate, fees, repayments and total cost before signing the final credit agreement.
Can you get car finance before choosing a car?
Potentially. Some finance processes allow you to apply or seek conditional approval before selecting the exact vehicle you want to purchase. The lender can assess information about you and the amount of finance being considered before all of the vehicle details are known.
You may be able to start the car-finance process before finding the car, but final funding can still depend on the vehicle, transaction and lender requirements.
Why arrange finance before shopping for a car?
Consumer Protection recommends understanding how much you can comfortably afford before you start viewing vehicles. It also recommends trying to sort out finance before buying when borrowing is required. Having a clearer idea of the finance available can help you focus your search on vehicles within an appropriate price range.
What is car loan pre-approval?
Pre-approval generally means a lender has carried out an initial assessment and indicated that finance may be available subject to specified conditions. The exact meaning and conditions depend on the lender, so read any pre-approval carefully rather than treating it as an unconditional promise to fund any car you choose.
Pre-approval can provide an indication of potential finance, but it should not be treated as final approval for every vehicle or transaction.
What can a lender assess before you choose the car?
A lender can assess information about your financial circumstances before the exact vehicle is known. New Zealand consumer-lending requirements mean lenders may need information that helps them assess affordability and suitability.
| Information | Why it may matter |
|---|---|
| Income | Helps assess your ability to support repayments |
| Living expenses | Shows how much of your income is already committed |
| Existing debts | Identifies other repayment obligations |
| Credit history | Can form part of the lender's credit assessment |
| Amount requested | Shows the size of the proposed new commitment |
Why might the lender still need to approve the car?
The vehicle itself can be relevant to the final finance, particularly where it will secure the loan. Depending on the lender, factors such as the vehicle's value, age and other characteristics may need to meet lending criteria before funding is completed.
Does pre-approval mean you should spend the maximum amount?
No. An amount that may be available through finance is not necessarily the amount you should spend. Consumer Protection recommends considering the total cost of owning a vehicle, not just its purchase price or finance repayment.
| Cost | Remember to allow for |
|---|---|
| Finance | Repayments, interest and applicable fees |
| Insurance | The cost of appropriate vehicle cover |
| Fuel or charging | Regular vehicle running costs |
| Servicing | Routine maintenance |
| Repairs | Unexpected mechanical expenses |
| WoF and licensing | Ongoing road-use requirements |
Can arranging finance first help at a dealership?
It can give you another finance option to compare with any finance offered through the dealership. Consumer Protection recommends shopping around and, where possible, seeking pre-approval before going through dealer-arranged finance.
You do not have to judge dealer finance in isolation. Compare it with other suitable finance available to you.
Should you choose a car based only on the weekly repayment?
No. A low weekly repayment can be produced by extending a loan over a longer period. Before accepting finance, compare the interest rate, fees, loan term and total amount repayable as well as the regular payment.
What should you check once you find a car?
Finding a vehicle within your budget is only part of the process. Consumer Protection recommends checking the vehicle itself carefully before buying.
| Check | Why |
|---|---|
| Test drive | Helps you assess how the vehicle drives |
| Service history | Provides information about previous maintenance |
| WoF and licence | Check the vehicle's current status |
| Money owing | Identify relevant registered security interests |
| Vehicle history | Can reveal issues relevant to the purchase |
| Pre-purchase inspection | Can identify mechanical or safety problems |
Can you change your mind and choose a different car?
Before final finance is completed, the vehicle you ultimately choose may be different from the one you initially had in mind. Whether an existing pre-approval can be used for another vehicle depends on its conditions and whether the replacement vehicle meets the lender's requirements.
Does pre-approval guarantee the interest rate?
Not necessarily. The terms of any pre-approval determine what has actually been indicated. Check whether the rate, amount and other terms are confirmed or conditional, and review the final disclosure before signing the credit agreement.
Does applying for car finance involve a credit check?
A lender may obtain a credit check when you apply for finance. Consumer Protection says lenders use credit reports to assess lending risk, and information such as existing debt, repayment history, missed payments and recent credit applications can be relevant.
Check what type of assessment or credit enquiry will occur before submitting an application if this is important to you.
Finance first or car first?
Neither sequence is appropriate in every situation, but understanding your finances before committing to a vehicle can reduce uncertainty. The important point is not to treat finance approval as a substitute for checking whether the vehicle itself is suitable.
| Finance first | Car first |
|---|---|
| Can provide a clearer shopping budget | Lets you identify the exact vehicle price first |
| Allows finance comparison before purchase pressure | Provides exact vehicle details for the application |
| Vehicle still needs to meet applicable requirements | Finance still needs to be approved |
Before you sign the final car loan
Consumer Protection says lenders must provide disclosure showing important information including the loan amount, payment terms, interest, fees and security interests. Read the final finance agreement even if you previously received pre-approval because the final contract is what determines the actual borrowing arrangement.
Compare car finance before choosing your vehicle
Starting the finance process before selecting a car can help you understand the borrowing options potentially available and establish a more realistic shopping budget. EveryLoan refers visitors to Simplify Finance, where applications, lender matching, credit decisions and funding are handled by Simplify Finance and its lender partners.
EveryLoan is not a lender. Pre-approval, final approval, rates, loan amounts and vehicle eligibility depend on the lender and individual application.
Frequently asked questions
Potentially. Some lenders may assess an application or provide conditional pre-approval before you have chosen the exact vehicle.
Not necessarily. Pre-approval can be conditional, and final finance may still depend on the vehicle, transaction and other lender requirements.
No. Consider what comfortably fits your budget after allowing for insurance, fuel, servicing, repairs and other vehicle ownership costs.
The lender may require the final vehicle details before funding is completed, particularly where the vehicle will be used as security.
Consumer Protection recommends trying to sort out finance beforehand where possible and comparing lending options rather than automatically accepting dealer-arranged finance.
Yes. Finance approval does not establish that a vehicle is mechanically sound. Consider vehicle-history checks, a test drive and an independent pre-purchase inspection.