Should You Finance Your Car Through a Dealership or a Bank?
By Need a loan to buy a new car? You can choose to finance your purchase via a bank or the dealership. There are many different factors for you to take into consideration depending on your situation. Making the right choice could help you save both money and time. Here is what both these options entail.
Going Through the Bank
Financing your purchase through a bank involves getting a pre-approved car loan from the bank or credit union. The lender usually provides you with a quote and letter of commitment that you hand over to the dealership. You can easily apply for a pre-approved loan online or visit your local branch. The bank or credit union runs a credit check before determining the rate of interest for your loan.
Financing Through the Dealer
Financing a car deal via the dealership works the same way as bank financing. Once you finalize the car you want to buy, the dealer fills out a credit application on your behalf and submits it to multiple lenders. This gives you the option to compare the various rates and terms offered to you and pick one that suits you best.
But you should be wary because in some cases the dealer may quote a higher rate of interest as compared to what the lender might be offering and keep the difference as compensation.
You usually get a lower interest rate while buying a new car through a dealer compared to if you were buying a used car. Most dealers offer promotional offers on financing for brand-new models.
If you are someone who has a low credit score, you can opt-in for the dealership’s in-house financing option. The costs and down payments required for such loans are usually higher.
Picking the Best Option
Your biggest priority when choosing between banks and dealerships should be to save as much money as you can.
The best way of determining which option works out best is getting a pre-approved loan from the bank and then reaching out to the dealer for quotes to compare.
Take your time and gather as much information as you can from various banks and dealers before you make your decision.