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(image: https://i.ytimg.com/vi/zQaSm3g_Huc/maxresdefault.jpg)Indirect auto financing: What is it and is it an ideal idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering financial calculators and interactive tools, publishing original and objective content, by enabling you to conduct your own research and compare information at no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies that compensate us. This compensation may impact how and when products are featured on this site, including, for example, the sequence in which they be listed within the categories of listing, except where prohibited by law for our mortgage home equity, mortgage and other home lending products. However, this compensation will not influence the information we provide, or the reviews that you see on this site. We do not cover the vast array of companies or financial offerings that could be accessible to you.
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3 min read Published 21 October, 2022
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Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to control their finances through providing clear, well-researched information that breaks down complicated topics into bite-sized pieces.
Review by Mark Kantrowtziz. Reviewed by Nationally known student financial aid expert
Mark Kantrowitz is an expert on financial aid for students, the FAFSA, 529 plans, scholarships as well as tax benefits for education and student loans.
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Indirect auto occurs when a lender gives financing to the vehicle seller rather than directly to the purchaser. The seller then passes the financing to the buyer. Lastly, the buyer is required to make each month regular payments to the lender whom the dealer is connected with in order to pay off the loan. This method of financing vehicles comes with benefits and drawbacks which is why it is essential to know all the options prior to signing an indirect auto loan. What is indirect auto financing? Indirect auto financing is available via lenders within their network of partners. Instead of searching for an loan and getting preapproved before going to the dealer, you will obtain the financing when you purchase the car. The seller will receive a commission or other type of payment for connecting you with the lender. It could be in terms of a percent that's added to the interest rate. When you make the final payment and the lender will release the lien or title on the vehicle to you. For the duration of the loan term, you will also be charged fees on the loan, just as you would with a . Another type of direct loans Indirect loans can also refer to using a marketplace or broker. These options let 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 need the submission of a soft inquiry. Furthermore, you will be able to see potential loan offers that include the 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 cost of all loans. There are pros and cons to indirect financing While indirect financing may help you enjoy a the most seamless experience when buying a car but there are also disadvantages to think about before you make a move. Pros of indirect financing In certain instances, it is better sense . Buy and shop at the same time. It's often more convenient to purchase from the dealership. You'll be able to browse and obtain financing the on the same day. Less legwork. Although it's still an excellent idea do so, it's not required. If you wish, you can go in without contacting other lenders prior to deciding on your vehicle. Bad credit options available. Specialty dealers can offer solutions for customers with less than perfect credit. Pros and cons of indirect financing Prior to you visit the dealership without preapproval from an outside lender take note of these disadvantages. More expensive rates. The dealership usually adds a percentage on top of what is offered by lenders that match your requirements. This means that you'll likely get a with the direct lender. You won't have as much control. You don't get to choose which lender you share your information around with. If you're already working with a credit or bank union, it could be beneficial to sign up with it -- you may obtain a better rates or conditions than you would otherwise. Unavailable for some purchase types. If you're looking to buy from a , indirect financing is not likely to be an alternative. How to get indirect auto financing? The steps for obtaining the indirect financing for your vehicle are comparable to the process to obtain a traditional loan. However, before applying make sure you have all the documents available that the dealer will need to provide to the lender's within their network. This is a step-by-step guide on the process to follow by visiting the dealership. Shop around and choose your car. Apply for an loan at the dealership. Get approved and choose the best offer. Sign your loan documents. You can take possession of your . Alternatives to indirect auto financing If you don't want to take out an auto loan through a dealership There are a variety of other options for financing your future car. Banks typically offer loans for vehicles, although it can be an involved process. If you've got good credit and a good credit score, a bank may be the way to go. But if you , this might not be the most viable option. Credit unions operate similarly to banks, however the members who are members of the institution will be the main focus rather than investors. It is likely that you will need to join the credit union, and membership requirements for members will vary from one to another. But joining a credit union that offers auto loans can save you money and offers more flexibility. Online lender Using 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 reasonable loan conditions, instead of the hefty commissions you might get at a traditional dealership. The bottom line Indirect auto financing is a convenient way to purchase your next vehicle. However, it's important that you do your research prior to visiting the dealer as there could be cheaper elsewhere. There is a chance that the dealership is willing to match or beat an external loan offer to gain your business. Find out more
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Written by
This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial team.
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 take control of their finances by providing concise, well-studied information that breaks down complex topics into manageable bites.
Auto loans editor
Reviewed by Mark Kantrowtiz Reviewed by Nationally acknowledged student financial aid expert
Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as scholarships, 529 plans educational tax benefits, student loans.
Nationally anerkannt student financial aid expert
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