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What is the difference between financing a car thru a dealership and getting an auto loan through your bank?

10 Responses to “What is the difference between financing a car thru a dealership and getting an auto loan through your bank?”

1. The Auto Evaluator™ on January 13th, 2010 at 2:51 pm

   It depends on what special financing you are talking about. If you mean the ones advertised on TV, such as 5.9% APR on the 2008 Fusions, this is not dealership financing. True dealership financing comes mostly from buy-here, pay-here lots. This is manufacturer financing and typically there is a cash rebate in lieu of the APR, so find out what your credit union will approve you for, as far as an interest rate.

   Research the car you are looking to buy on edmunds.com and see what rebates are available to you in your area. Now when you pick out the vehicle, have the sales associate figure payments both ways <i.e. Price-Rebates and credit union rate / Price and special rate>. Whichever gives you the lower payment is typically the favorable method, however if the payments are the same always take the lower selling price / higher interest rate combo. This will give you a lower balance in the event you vehicle is wrecked or stolen. Good luck and you can email me if you have questions.

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2. jay on January 13th, 2010 at 2:51 pm

   It’s easier through the dealer, but typically a higher interest rate. You credit union should have lower rates and will offset the extra time.

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3. s10blazed96 on January 13th, 2010 at 2:51 pm

   The difference will depend on the specs of each location. The biggest differences will be in the form of different percentage rates and length of the loan. I found it easier to finance through the dealership when I bought my new car. They had special financing offers that the banks couldn’t touch.

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4. UCANTCME on January 13th, 2010 at 2:51 pm

   The credit union or bank would be better but at the same time if the dealer is offering a very low rate then you would let them do the financing.

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5. jeligula on January 13th, 2010 at 2:51 pm

   It really depends on the dealership. If you are financing through GMAC or FMCC, then it’s pretty much the same as a bank – a bank that just happens to be owned by the car company. They will offer you more options, usually, than any commercial bank will. If you are buying through what we call a "rock lot", then the interest rate will be very high if they "finance" it themselves. Watch out for these credit crooks as they will charge the highest interest rate allowable by law, usually 25%.

   If you have a good working relationship with your credit union, I would give them your business.

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6. kimi d on January 13th, 2010 at 2:51 pm

   LOL its all in the interest. A private car lot is makin there money by getting your finacing. So the interest is going to be alot higher. Go through your bank the interest and payoff is going to save you alot of money.

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7. CarMan on January 13th, 2010 at 2:51 pm

   Dealers can sometimes offer special promotional rates that can’t be matched by local banks or credit unions. It’s best to start by getting preapproved at a bank or credit union so that you’ll have something to compare to your dealer’s offer. Then take the best deal.

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8. burn on January 13th, 2010 at 2:51 pm

   Quite a few dealers here in the UK are offering 0% finance.
   If you can get this it is better to go via a dealer.
   If they are offering just their normal rates then it would be far cheaper going via your bank.

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9. D on January 13th, 2010 at 2:51 pm

   Shop around for rates with different banks. You aren’t tied to the one that you do your banking through either. Some credit unions require you to have a savings account with $25 in it, but oftentimes they will just open the account and give you the $25 deposit to get the loan.

   My roommate just bought a car and the dealership tried to give her an interest rate of 8.5%. I told her that was insane and that she should look at other banks. I work in banking and showed her how to call banks and ask about their rates and she was able to find a loan for 6.25%. She saved over $20 a payment, over the life of her loan it will save her well over $1000 on the cost of her car!

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10. kathsps on January 13th, 2010 at 2:51 pm

    Your credit union probably has better rates.

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