From childhood, Coppola envisioned a film about the Tucker automobile and while attending the UCLA School of Theater, Film and Television in the early 1960s, further refined a film concept based on the life of Preston Tucker. In June 1973, during the filming of The Godfather Part II (1974), Coppola announced his intention to start development at American Zoetrope as writer, producer and director. He had already approached Marlon Brando for the lead role. He then purchased the rights from the Tucker Estate in 1976, and, in addition to Brando, discussed the leading role with Jack Nicholson and also considered Burt Reynolds. Taking inspiration from Citizen Kane (1941), Kabuki theater and the work of Bertolt Brecht, Coppola initially planned to make Tucker as a "dark kind of musical." He later said that the idea approximated the style of an experimental film, similar to Mishima: A Life in Four Chapters (1985), which he produced.
The musical would have featured Tucker predominantly, but storylines would have interwoven Thomas Edison, Henry Ford, Harvey Samuel Firestone and Andrew Carnegie as supporting characters. Leonard Bernstein agreed to write the music, and Betty Comden and Adolph Green were hired to write the lyrics. They all spent a week at Coppola's home in California, planning the musical which resulted in Bernstein writing one song. Coppola also approached Gene Kelly as a consultant for the dance choreography. However, financing for Tucker fell through when Coppola's production company, American Zoetrope, filed for bankruptcy after the box office failures of One from the Heart (1982) and The Cotton Club (1984). Coppola abandoned Tucker for the time being and went to work on Peggy Sue Got Married (1986).
In 1986, during the production of Captain EO (1986), Coppola's friend George Lucas encouraged him to revive development for Tucker, believing it to be "the best film Francis had ever been involved with." In addition, Lucas agreed to serve as executive producer and offered the use of his filmmaking companies, Lucasfilm and Industrial Light & Magic. He also convinced Coppola to drop the musical idea in favor of doing a homage to the films of Frank Capra, especially Mr. Smith Goes to Washington (1939). Coppola became interested in the American Dream aspect of the storyline, as well as post-World War II capitalism and politics. At one point, Coppola approached Capra to produce the film with Lucas, however, Capra thought Tucker was a failure and Coppola dropped that plan.
Coppola originally intended to write the screenplay himself, but due to his commitment to the filming of Gardens of Stone (1987), engaged Arnold Schulman who scripted Capra's A Hole in the Head (1959). Schulman eventually collaborated with David Seidler on the Tucker project. Subsequently, Coppola rewrote the Schulman and Seidler scripts, but an attempt to get a co-writing credit on the film was overruled by the Writers Guild of America, as an arbitration committee determined Coppola did not contribute enough to the script to warrant an on-screen writing credit. The filmmakers devised a $24 million production budget, but Universal Pictures, Walt Disney Pictures, TriStar Pictures and Paramount Pictures wanted Coppola and Lucas to lower it to $15 million. Distributors were also dubious about working with Lucas after the 1986 commercial and critical failures of both Labyrinth and Howard the Duck. Lucas decided to cover the $24 million budget himself, and pre-production proceeded.