What are your financing options when buying a car?

Finding Financing

Finding the right auto loan for your car is obviously a crucial part of your purchase, but it can be difficult to figure out where you should go to find the best loan. The two most common places to obtain an auto loan are dealerships and financial institutions, i.e. a bank or credit union. Either one can be a good option for you, but both banks and dealerships have their pros and cons.

Financing Through Your Bank

One reason some people prefer to finance vehicles through their bank or credit union is that it takes the middle man, the dealership, out of the equation. Going through a bank also gives you the option of being pre-approved for a loan before you go car-shopping. This lets you know exactly how much you can spend, which will help you narrow down your options and thus save you time at the dealership. Additionally, if you get a loan from your current bank or credit union, they may be able to give you a lower interest rate, depending on what banking products you use.

However, there are also disadvantages to financing through a bank instead of through the dealership. While some people prefer to go to the dealership with a pre-approved loan, other customers would rather be able to check out the dealership’s inventory before beginning the financing process and figure out exactly what they want. Additionally, banks and credit unions often have stricter requirements to qualify for a loan, so if you don’t have great credit, they may not approve you.

Financing Through The Dealership

One of the advantages of financing through the dealership is that you can get very good deals when they have special promotions—often a much lower price than what a bank can offer you. If you take advantage of the right deals, you can get a rate that a bank or credit union won’t be able to match. Another benefit of financing through the dealership is the fact that you can negotiate with the dealer and often walk away with a lower rate. Also, dealerships are often more likely than banks to approve customers who have low—or even no—credit.

Getting a loan through the dealership can have its disadvantages, however. Some dealers may try to take advantage by increasing the interest rates or sticking customers with long loans, which could result in him or her paying more for the vehicle over time than its actual value. If you choose to finance through your dealership, pay close attention to the rates you’re getting to guarantee you’re getting a fair deal.