Dealer Vs. Bank: Vehicle Financing
Auto loans are offered through two different sources: the dealership or a direct lender. A direct lender includes a bank, credit union or finance company. Car finance through a dealership usually leads the dealership to selling the loan to a finance company after its initial processing. Most car buyers who are interested in obtaining the best deal on their car loan will take the time to explore both options before signing any paperwork. A refinance auto loan is also an option through a direct lender for car owners who want to try and achieve a better interest rate and monthly payment on their current vehicle.
The auto loan rates currently available through both sources depends on the current market conditions, and personal factors, like a buyer’s credit score and the amount of the down payment. Comparing these two car finance options is important for car buyers who have a monthly budget for their new purchase.
There are benefits and drawbacks to each car loan source, and weighing the options thoroughly is the best way to obtain a deal on a car purchase that works for you. Review the sections below for detailed information on financing a car through a dealership or through a direct lender.
Auto Finance Through a Dealership
Many car buyers end up with a car loan directly through the dealership simply because of the convenience of obtaining it. As a car buyer, if you are already at the dealership to pick out your new purchase, it just makes sense to sit down with the finance department and hash out a car finance deal while you’re there. Dealerships also usually have relationships with several banks, so they can offer bad credit car loans or affordable used car loan rates to their customers. While the dealership may be able to obtain different auto loan rates from banks, these rates may not always be the best deals around on the market today.
Auto loans through a dealership are appealing to car buyers because of the incentives and discounts the dealership can offer. Sometimes, the dealership will throw in a longer warranty for no extra cost or free maintenance for a period of time with the financing deal. This incentive is used so that the consumer will purchase the vehicle through that specific dealership, on the spot, while using the dealership’s preferred bank for financing.
If you are set on purchasing a car at a dealership the moment you see it, you may be stuck with the car loan interest rates the dealership is offering. Most direct lenders aren’t open late or on the weekends, so loan quotes won’t be available at these times. Many car buyers who want to find the best deal will shop around to direct lenders before ever stepping foot into a dealership.
Direct Lender Auto Loans
For a refinance auto loan, a direct lender can take a look at your current loan and assess what the new monthly payments would be based on your current credit score current auto loan rates. If the car is a new purchase, you can generally sit down with a loan officer at several different banks or credit unions to shop around the loan amount you qualify for, interest rate, and terms. A direct lender can generally offer shorter loan terms for a higher monthly payment, which is a benefit for many car buyers who want to pay off the loan quickly.
The lowest auto loan rates may be found through a direct lender if you already have a relationship with your local bank or credit union. These creditors can sometimes offer a better deal to current clients who can prove a credible banking history and present a good credit report. Financing a car through the bank is also more beneficial for many car buyers because they know the loan terms up front. Speaking with a bank representative to understand fully the late payment penalty fees, monthly payment due, upfront cost, and length of the loan can allow a car buyer to feel less rushed and more informed. Armed with the knowledge of the loan terms and the loan amount qualified for, a car buyer can skillfully narrow down the vehicles he or she is interested in, making car shopping much easier and more realistic.
Vehicle finance options are offered through the dealership or a direct lender, and both have their benefits and drawbacks. An informed car buyer will have more success at staying within budget limitations and obtaining a loan with the best auto loan interest rates. If you’re in the market for a car loan, explore both options, loan terms, and auto loan rates, before choosing the financing option that works best for you.