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4 min read. Published August 18 2022
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If it is time to purchase your next car it is important to decide whether you will choose to go through your bank or through the bank itself to get car financing. Both provide you with the chance to drive away with a brand new car however, they differ in terms of terms of experience, rates available in addition to loan lengths. What should you consider when choosing between bank or dealer auto loans Be aware of the possible advantages and disadvantages of both prior to submitting an application for financing. Bank financing The primary advantage of going directly to your bank is that you’ll get lower interest rates. Dealers typically have higher interest rates, because dealers will add a markup to the interest rate when they connect you to the lender. Along with this the fact that banks and credit unions offer an array of options so you’re more likely to locate an option for financing that is suitable for you. Dealer financing If you go through the , you can benefit from a variety of benefits that will make the process of financing easier. You can use the dealership’s financing office that will cut down on the amount of time that you’d spend shopping around with other lenders. Dealerships are also known to offer manufacturer offers, such as rebates as well as other . Auto financing through a bank A bank could be a great option if you are looking to steer clear of shopping around and comparing rates. Benefits of auto financing from a bank If done properly, financing a car through the bank is an excellent idea. Banks tend to provide low interest rates and can be a good alternative if you require an additional loan. The drawbacks of auto financing at banks However, outside bank loans are more time-consuming to process, and you may have to apply in person. You also might not qualify for a loan if you have low credit scores. Consider the urgency of your vehicle loan as well as the condition of your credit before deciding to borrow from the credit union or a bank. How do you finance with a bank If financing through a bank is the right choice for you, then you must first satisfy the eligibility requirements of your bank in order to be eligible for the loan. Many banks will have the auto loan minimum and maximum amount, so check if your chosen bank can provide you with the auto loan that fits your needs. It is important that you know what car you intend to finance. Certain banks will only lend to cars purchased through dealer partners. They may have age and mileage restrictions. Find an lender which offers refinancing without fees. That way, if your financial situation changes or worsens in the course of time, you can adjust your loan without incurring any additional fees. It is also necessary to request a quote request from your bank. In the process of obtaining a quote you can choose which term is best suited to your monthly budget and get an idea of the overall cost with interest. If you decide to go ahead with the application process, the lender will likely request documentation like W2s, pay stubs from the last few months, proof of address and an official ID. Are bank auto loans the right choice for you? The option of borrowing money from a bank may be a viable alternative if you require more loan amount, a low interest rate or the repayment period is 5 years or more. Take a look at the drawbacks and advantages of financing through banks prior to signing off and be certain to research your alternatives. A dealership can finance your car The dealership could be an option for you if your credit isn’t in the best shape as well as if you’re not in an existing relationship with any banks or credit unions. Benefits of financing through a dealership The major advantage of using a dealer to finance your car is convenience. You don’t need to go through an institution and then wait for days, or weeks, for approval. Instead, you’ll just go to the dealership and take home the car of your . If you’ve got someone with you, you could have the person accompany you to make the purchase process more relaxing. Drawbacks of financing through dealerships The first drawback may initially seem like a benefit. Dealerships generally offer financing options that include a minimum of $0 down payment options. While these can make for an affordable monthly payment and the initial cost, you’ll pay more in interest overall. You are also likely to receive a greater interest rate. It is also more costly 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 you to certain lenders, even if you could find an APR that is lower elsewhere. How do you finance with dealers Dealerships collaborate with big banks as well as online lenders as well as credit unions to provide car loans via their financing department. This means that you’ll be able to finance your vehicle by using a program which the dealer has with an lender, and the dealer will take care of much of the heavy lifting. If you’re granted financing through the dealership, you’ll be taken to the dealership’s financing department to conclude the transaction. This process will differ depending on the dealership, but you’ll likely have to fill out several forms and then submit evidence for income as well as assets. Once you are accepted, the finance manager or an agent who is the dealer’s automobile lender will be able to assist you with reviewing the loan details and finalize the loan. Is dealership financing right for you? A direct loan to your vehicle through the dealership is the ideal alternative if you’re looking to skip the hassle involved in shopping for financing. It’s also simpler to get approved for, so if you have poor credit, financing through the dealership is likely to be the best option. Some tips for getting an auto loan Whether you are applying for your car loan directly through the dealership or via a bank or credit union it is essential to get prequalified and research. Get prequalified If you are applying for financing through an institution like a credit union or bank, take advantage of the process. The procedure is generally available on the internet and is a fantastic opportunity to determine of how much you will be in a position to get. You’ll need your earnings as well as savings details to finish the process. If you are prequalified look for a loan with the rate you were offered. Many auto loan rates are negotiable, as can be said of fees and length of loan. Many lenders will compete for your business, and you can use this to your advantage. Don’t choose an lender that doesn’t provide favorable conditions. The next step is to consider dealerships as well as banks can be viable alternatives when it comes to financing your new car. But they each have their advantages and disadvantages Be certain to do your research to find the most favorable rates of interest and repayment terms. Find out more
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Written by
This article was written with the help of automation technology, and then checked for accuracy and editing by an editor from our editorial team.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to control their finances with concise, well-researched and well-researched content that breaks down otherwise complex subjects into bite-sized pieces.
Auto loans editor
Reviewed by Mark Kantrowtiz Reviewed by Nationally recognized scholar financial aid specialist
Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as scholarships, 529 plans educational tax benefits, student loans.
Nationally acknowledged expert in student financial aid
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