Auto loans are offered by two different sources, a dealership or direct lender. To obtain the best auto finance option, a car buyer can shop the loan around to both resources to ensure the best deal is established. Each car finance option will offer varying loan terms, including the length of the loan, the interest rate, down payment due, or amount of monthly payment due.

Every car buyer has a unique personal finance situation, and with different finance options, he or she can make a choice that caters to specific interests and needs. Each vehicle finance loan choice has pros and cons, so a car buyer can decide the best scenario for his or her situation. Learning more about financing a car through each outlet is the best way to make a beneficial decision. Here is more information on obtaining a vehicle finance loan from either a dealership or direct lender.

Auto Loans From the Dealership

A car loan from the dealership is the most convenient way for a car buyer to obtain financing. After car shopping, the salesperson can simply sit down with a car buyer and lay out the financing options available through the dealership. The salesperson can usually run the car buyer’s credit and receive a confirmation of approval for the loan immediately. Auto loan interest rates through a dealership are comparable to market trends, and the loan is usually sold to a bank or financial institution upon completion.

Auto finance loans through a dealership can be a good choice because they typically have relationships with multiple banks, allowing them to shop the loan for you. However, bad credit car loans through a dealership don’t necessarily get affordable terms or interest rates and should be shopped around before completion. Dealerships may offer special financing benefits, like helping with a down payment, or shortening a contract’s length, as an incentive to purchase the vehicle from them and use their bank for financing.

A refinance auto loan is not offered through a dealership, and must be negotiated directly with the bank, also referred to as the assignee, if needed. Car finance through a dealership may be convenient, but it’s always a good idea to consider other options before visiting a dealership so you know current auto loan rates and what’s available.

A Car Loan From a Direct Lender

Some of the lowest auto loan rates may be found through a direct lender. A direct lender is classified as a bank, finance company, or credit union. Those looking to finance a car need to secure this type of financing with the bank before shopping for a car. While it’s possible to obtain car loan interest rates from an outside bank while at the dealer, this process can take longer and may not be completed on the same day.

Auto loans agreed upon with a direct lender are essentially a way for a car buyer to borrow the money and pay the dealership. When a vehicle is chosen, the car buyer pays for it using the direct lender’s loan, and agrees to pay this loan back to the direct lender under their conditions.

Used car loan rates may be more appealing from a direct lender. Often times, the lender will ask the purchase price of the car in order to quote the monthly payments and interest rates available for a potential car buyer. It’s important to have an idea of the type of car you’re interested in and the possible price range before seeking loan quotes with a bank or credit union.

Auto loans from a direct lender allow you to shop around to different banks and figure out exactly what your monthly payments will be for a specific purchase price. This can give you the upper hand in choosing a vehicle and what price you are willing to pay. Knowing your auto loan rates and terms before you visit a dealership can also allow your shopping experience to be easier and more transparent at the dealership.

When it comes to auto finance, there is no need to feel you have to take the dealership’s loan offer. Checking in with a direct lender can allow you to compare the current auto loan rates and terms of each choice before signing anything. Exploring both options of financing a car will ensure you can find the loan that works best for your situation and monthly budget.

After reviewing the offers from both the dealership and the direct lender of your choice, take the time to ask questions and review the numbers and terms. Characteristics of the loan like when the interest is paid, the monthly payment amount, late payment penalty fees, and the interest rate should all be examined before agreeing to a loan on your new or used car.

Last updated on Friday, February 28 2020.