The former Leeds United and Rotherham boss has been seeking assurances over the club's close-season transfer policy before committing to a new deal.
Warnock, 68, whose contract ends in the summer, had a meeting with Bluebirds chairman Mehmet Dalman on Monday.
A source at the Championship club has told BBC Wales Sport "progress" was made during the informal discussions.
Cardiff were in the relegation zone when Warnock took over in October, but have moved up to 12th after three successive victories.
Before Saturday's 5-0 win over Rotherham, Dalman told BBC Wales Sport he was confident of keeping Warnock.
Owner Vincent Tan will have to consider Financial Fair Play regulations when agreeing to make funds summer available in the summer.
Providing Tan gives the go-ahead, the club hierarchy will be keen to reach a new agreement with Warnock as soon as possible.
Talks over Neil Warnock's future as Cardiff City manger are progressing, according to club sources.