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Is it better to finance with an auto dealer or a bank? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by offering interactive financial calculators and tools as well as publishing objective and original content. We also allow you to conduct research and compare data for no cost and help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies who pay us. This compensation may impact how and when products are featured on this website, for example, for example, the order in which they may appear in the listing categories, except where prohibited by law. This applies to our mortgage, home equity and other home lending products. But this compensation does affect the information we publish, or the reviews that appear on this website. We do not cover the vast array of companies or financial offers that may be available to you.
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4 min read Published August 18, 2022
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When it’s time to buy your next car, you must first decide whether you will choose to go through your bank or directly to the bank to secure car financing. While they both provide you with the chance to drive off with a brand new vehicle however, they differ in terms of experience, available rates as well as loan lengths. What should you consider when choosing between bank or dealer auto loans Be aware of the possible advantages and downsides of both options prior to submitting an application for financing. Bank financing The major advantage of applying straight to the bank is that you will likely have lower interest rates. Dealers usually have higher interest rates due to the fact that dealers add a markup to the interest rate whenever they connect you to a lender. Along with this lenders and credit unions provide a wide range of products so they are more likely to provide an option for financing that is suitable for you. Dealer financing If you go through the , you can take advantage of several perks which make financing easier. You can utilize the dealership’s finance office which reduces the amount of time that you’d spend shopping around with other lenders. Dealerships often also offer manufacturer deals, including rebates and other . Bank financing for autos Financing through a bank can be an excellent alternative if you want to steer clear of shopping and comparison shopping. Benefits of auto financing through a bank When it is done right using a vehicle loan from banks can be an excellent option. Banks tend to provide low interest rates on an and could be a suitable alternative if you require an additional loan. The drawbacks of auto financing at banks However, non-bank loans can take longer to process, and you may have submit your application in person. It is also possible that you will not be eligible for an loan in the event of an unsatisfactory credit score. Take into consideration the importance of your vehicle loan and the health of your credit before deciding to finance through the credit union or a bank. How do you finance with the bank If borrowing from an institution is the best choice for you, you first will need to satisfy the eligibility requirements of your bank in order to be eligible for the loan. Most banks have the auto loan minimum and maximum, therefore, make sure you check to see if the bank offers the auto loan that is suitable for your needs. It is essential that you know what car you intend to finance. Certain banks will only lend to cars purchased through dealer partners. They may be able to impose mileage and age limitations. Look for an lender which offers refinancing without fees. In this way, in the event that your financial situation improves or deteriorates over time, you are able to adjust your loan without incurring any additional fees. You will also need to obtain a loan bank quote. When you get a quote you will be able to decide what term best fits your budget each month and also determine the total cost, including interest. When you do decide to go ahead with the application process then the lender is likely to require documents, such as W2s, recent pay stubs as well as proof of address and a government-issued ID. Is bank auto financing right for you? Borrowing money from a bank might be a good alternative if you require a larger loan quantity, low interest rate, or the repayment period is 5 years or more. Be aware of the disadvantages and benefits of bank financing before making a decision and make sure to evaluate your alternatives. Auto financing through a dealership The dealership could be an ideal option if you’re credit isn’t in the best condition, as well as if you’re not in an existing relationship with any bank or credit unions. Benefits of dealership financing The major advantage of using a dealer to finance your car is convenience. There is no need to make an application for financing with an institution and then wait for days, or weeks for approval. Instead, you’ll be able to go to the dealer and drive home behind the steering wheel of your . If you’ve got a , you can have that person come with to make the purchasing experience a bit less stressful. Drawbacks of dealership financing The initial drawback might appear like a benefit. Dealerships generally offer financing options that include a minimum of $0 option for down payments. Although these may result in an attractive monthly payment as well as the initial cost, you’ll pay more in interest in the long run. Also, you are likely to get a higher interest rate. The cost of dealer financing can be higher than standard bank auto loans — even with the same credit score. Dealers both add a markup to the interest rate offered and are also enticed to direct you to certain lenders, even if they could offer an APR lower elsewhere. How do you finance with a dealership Dealerships work with big banks, online lenders and credit unions to offer auto loans via their financing department. This means that you’ll be in a position to finance your vehicle with a deal that the dealership has with a lender and the dealer will handle much of the heavy lifting. Once you have been accepted for financing by your dealer, you’ll be directed to the dealership’s financing department to close the deal. The process for approval will vary based on the dealer, however you will likely need to fill in a couple of forms and provide documents that you have income or assets. Once you are approved, the dealership’s finance manager or an agent from the dealership’s auto lender will be able to assist you with reviewing the loan details and then approve the loan. Is dealership financing right for you? The option of financing your car directly at the dealership is the ideal choice if you want to stay clear of the heavy lifting involved in shopping for financing. It’s also simpler to get approved for, so if you have poor credit, financing through the dealership could be more affordable. Some tips for getting an auto loan Whether you are applying for your auto loan directly through the dealership or via the credit union or bank, it is important to apply for prequalification and then shop around. Be prequalified if you are applying for financing through a bank or credit union you should take advantage of the process. The procedure is generally available online and is a great opportunity to determine of how much you will be in a position to borrow. You will need your income as well as savings information to be able to complete the application. Shop around Once you prequalify you can shop around for the loan that is at the same rate as the one you were offered. A lot of auto loan rates are negotiable, and the same can be said for the fees and length of loan. Numerous lenders compete for your business, and you can leverage this to your advantage. Don’t choose the lender who doesn’t offer favorable terms. Next steps Both dealerships and banks could be choices when it comes down to financing your car. They each have their advantages and disadvantages So be certain to do your research to find the best rates of interest and repayment terms. Find out more
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Written by
This article was written with the help of automation technology, and then verified and edited by an editor from our editorial staff.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to control their finances through providing precise, well-studied information that breaks down otherwise complex topics into digestible chunks.
Auto loans editor
Reviewed by Mark Kantrowtziz Reviewed by Nationally recognized student financial aid expert
Mark Kantrowitz is an expert on student financial aid The FAFSA and 529 plans, scholarships educational tax benefits, student loans.
Nationally anerkannt student financial aid expert
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