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Is it better to finance with a bank or dealership? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive tools and financial calculators as well as publishing objective and original content. This allows users to conduct research and analyze data for free and help you make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this website are provided by companies that pay us. This compensation could affect how and when products are featured on this website, for example the order in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other home lending products. However, this compensation will affect the content we publish or the reviews that you read on this site. We do not include the entire universe of businesses or financial offers that may be accessible to you.
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4 min read Published August 18, 2022
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Mark Kantrowitz is an expert on student financial aid The FAFSA as well as scholarships, 529 plans, education tax benefits and student loans.
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When the time comes to purchase your next car, you must first decide whether you will use your bank directly or through the bank itself to get vehicle financing. While they both give you the opportunity to drive off with a new car, they differ in terms of experience, rates available as well as loan lengths. What should you consider when choosing between bank or dealer auto loans Think about the benefits and disadvantages of both prior to applying for financing. Bank financing The main benefit of going directly to your bank or is that you will likely have low interest rate. Dealers usually have higher interest rates, due to the fact that dealers will add a markup to the interest rate each time they connect you to an lender. In addition the fact that the credit unions and banks offer many different products so you're more likely to locate a financing option that works for you. Dealer financing If you go through the process, you'll be able to benefit from a variety of benefits that will make the process of financing simpler. You will be able to utilize the dealership's finance office, which cuts down the time you would spend shopping around with other lenders. Dealerships often also offer manufacturer offers, such as rebates and other . Auto financing through a bank A bank could be an ideal alternative if you want to steer clear of shopping and comparison shopping. Benefits of bank auto financing If done properly the process of financing a car with a bank can be an excellent option. Banks tend to have lower interest rates for an and could be a suitable alternative if you require a larger loan. The drawbacks of auto financing at banks However, non-bank loans may take longer to process and you may need to submit your application in person. You also might not qualify for an loan in the event of low credit scores. Take into consideration the importance of your vehicle loan as well as the condition of your credit before deciding to finance through an institution like a credit union or bank. How do you finance with an institution If financing with an institution is the best option for you, you first will need to satisfy the eligibility requirements of your bank to qualify for the loan. A majority of banks will have an auto loan minimum and maximum, therefore, make sure you check to see if the bank can provide you with an auto loan that fits your needs. It is essential that at this point you know what car you intend to finance. Certain banks will only finance vehicles purchased through dealership partners and have mileage and age restrictions. Look for an lender that offers fee-free refinancing. In this way, in the event that your financial situation changes or worsens in the course of time, you can modify your loan without incurring any additional fees. You will also need to request a quote bank quote. When you get a quote you will be able to decide which term is best suited to your budget each month and also gain an understanding of the total cost, including interest. When you do decide to go ahead with the application process and the lender will likely require documentation including W2s, recent pay stubs as well as proof of address and an ID issued by the government. Are bank auto loans the right choice for you? The option of borrowing money from a bank might be a good alternative if you require a larger loan size, lower interest rate, or a repayment term that lasts at least five years. Be aware of the disadvantages and benefits of financing through banks prior to taking the final decision. Be certain to research your options. A dealership can finance your car A dealership may be an ideal option if you're credit isn't in the best state, and you don't have a current connection with any banks and credit unions. Benefits of financing through a dealership The principal benefit of using a dealership to finance your car is convenience. You don't need to go through banks and have to wait days, or weeks, for approval. Instead, you'll just go to the dealership and drive home behind the wheel of your . Plus, if you have an, you can let the person accompany you and make the buying process more relaxing. Drawbacks of dealership financing The first disadvantage may appear like a benefit. Dealerships typically offer financing terms that include a minimum of $0 down payment options. While these can make for an affordable monthly payment and the initial cost, you'll end up paying more interest in the long run. You are also likely to get a higher interest rate. The cost of dealer financing can be higher than regular auto loans even with the same credit score. This is because dealers both add a markup to the interest rate and are also enticed to direct customers to specific lenders, even if you could find a better APR elsewhere. How to finance through dealers Dealerships collaborate with large banks, online lenders and credit unions to provide auto loans via their financing department. This means that you'll be in a position to finance your vehicle through a plan which the dealer has in place with a lender and the dealer takes care of most of the lifting. If you're granted financing through your dealership, you will be directed to the dealership's finance department to conclude the deal. This process will differ depending on the dealer, however it is likely that you need to fill out a few forms and submit your evidence of income and assets. After you have been accepted, the finance manager or an agent who is the dealer's automobile lender can help you review the loan details and finalize the loan. Is dealership financing right for you? A direct loan to your vehicle through the dealer is the right alternative if you're looking to avoid the heavy lifting associated with searching for car financing. It's also easier to qualify for, so even if you're not a credit-worthy person or a bad credit score, financing through the dealership could be more affordable. Some tips for getting an auto loan No matter if you're applying for your car loan directly through the dealership or via the credit union or bank, it is essential to get prequalified and shop around. Prequalify yourself If you're applying for financing through the credit union or a bank make use of the process. The process is usually offered online and is a great opportunity to determine of the amount you'll be eligible to borrow. It is necessary to have your income or savings as well as other personal information to be able to complete the procedure. If you are prequalified look for a loan at the rate you were offered. A lot of auto loan rates can be negotiated and the same could be said about the fees and length that you take out the loan. Numerous lenders compete for your business, and you can leverage this to your advantage. Don't choose a lender that doesn't provide favorable conditions. The next steps are to look at both dealerships and banks could be choices when it comes down to financing your new car. They each have their pros and cons Be sure to shop around to find the best rates and terms for repayment. Find out more
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Written by
This article was generated by using automated technology. It was then thoroughly edited and fact-checked by an editor on our editorial team.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to manage their finances with precise, well-studied information that break down complex topics into manageable bites.
Auto loans editor
Reviewed by Mark Kantrowtziz Reviewed by Nationally recognized scholar financial aid specialist
Mark Kantrowitz is an expert on student financial aid including the FAFSA as well as scholarships, 529 plans educational tax benefits, student loans.
Nationally recognized student financial aid expert
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