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Indirect auto financing: What exactly is it, and is it an excellent idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with interactive financial calculators and tools, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make sound financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this website are provided by companies that compensate us. This compensation may impact how and where products are displayed on this site, including, for example, the order in which they be listed within the categories of listing in the event that they are not permitted by law for our mortgage home equity, mortgage and other home loan products. This compensation, however, does affect the information we provide, or the reviews that appear on this website. We do not cover the universe of companies or financial deals that may be available to you.
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3 min read published October 21, 2022
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Indirect auto occurs when an lender gives financing to the vehicle seller rather than directly to the purchaser. The seller then passes the financing along to the buyer. Lastly, the buyer pays each month regular payments to the lender that the dealer has a relationship to in order to repay the loan. This approach to vehicle financing has its advantages and disadvantages, therefore it is crucial to be aware of all choices before you sign off on the indirect car loan. Indirect auto financing: What exactly is it? Indirect auto financing is available through lenders who are part of their partner network. Instead of seeking an loan and getting preapproved before visiting the dealership and obtaining the financing once you buy the vehicle. The seller is paid an amount of commission or another type of payment for connecting you with the lender. This can be in terms of a percent that’s added to your interest rate. After you have made the final payment and the lender will let the lien or title for the automobile to the. For the duration of the loan term, you will be required to pay fees on the loan like you would with the loan . Others indirect loans Indirect loans could also be a reference in the way of using a marketplace or broker. With these options, you input your personal details and then are matched to any or all lenders. Most of the time, your credit score won’t be affected as these online marketplaces just require the submission of a soft inquiry. In addition, you’ll be able view possible loan deals that include estimated monthly payments, the repayment period and interest rates to help you make an informed choice. Before you decide on one you should also compare the total cost of the loans. Pros and cons of indirect financing Although indirect auto financing may help you enjoy a an easier time buying a car but there are also disadvantages to consider before moving forward. Benefits of indirect financing In some cases, it makes better sense . Shop and buy at the same time. It’s often more convenient to buy at the dealership. You can shop and secure financing the same day. Less legwork. While it’s beneficial to do so do so, it’s not required. If you wish to go without applying with other lenders prior to deciding on your vehicle. Bad credit options available. Specialty dealers have options for those with less than perfect credit. The disadvantages of indirect financing before you make a trip to the dealer without a preapproval from an outside lender be aware of the drawbacks. More expensive rates. The dealership typically adds a percentage on top of the rates offered by lenders that meet your needs. This means that you’ll most likely be able to get a direct lender. There isn’t so much of a control. You can’t choose the lender your information is shopped around with. If you already work with a bank or credit union, it could be beneficial to apply with it. You may receive a lower price or better terms that otherwise. Unavailable for some purchase types. If you’re planning to purchase from a , indirect financing won’t be an option. How to get indirect auto financing? The procedures for getting the indirect financing for your vehicle are similar to the process to obtain a traditional loan. However, before applying ensure that you be prepared with any documents the dealer will need to provide to the lender’s within their network. Here’s a step-by-step breakdown of the process to follow by visiting the dealership. Shop around and choose your car. Apply for a loan in the car dealership. Get approved and choose the most suitable offer. Sign your loan documents. Get your loan documents in your possession . Alternatives to indirect auto financing If you’re not looking to get an auto loan from a dealer there are alternative options to finance your new vehicle. Banks typically provide loans for cars, but it can be more complicated. If you have good credit the bank might be the right choice. But if not are not, it might not be the best alternative. Credit unions function similarly to banks, but members in the credit union will always be the main focus rather than investors. It is likely that you will need to join the credit union, and membership requirements for members differ from one institution to the next. But joining a credit union that offers auto loans can help you save money and offers greater flexibility. Online lender Utilizing one of the online lender is another option to finance a car without the need of a dealership. Many online lenders focus on offering affordable rates and affordable loan terms, as opposed to the high commissions you could encounter at a traditional dealer. Indirect auto financing is a convenient option to finance your next vehicle. But, it’s essential to ensure you research the dealership prior to making a visit because you could get an alternative that is better. It is also possible that the dealership is willing to match or beat an outside loan offer to gain your business. Learn more
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Written by
This article was written by using automated technology. It was then thoroughly verified and edited by an editor from our editorial staff.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing clear, well-researched information that dissects complicated topics into bite-sized pieces.
Auto loans editor
Reviewed by Mark Kantrowtiz Reviewed by Nationally acknowledged expert on student financial aid
Mark Kantrowitz is an expert on student financial aid including the FAFSA and scholarships, 529 plans as well as tax benefits for education and student loans.
Nationally acknowledged expert in student financial aid
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