Home Budgeting Finance Should you finance your car from your dealer or get a loan from the bank?

Should you finance your car from your dealer or get a loan from the bank?

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Are you someone who is searching for a used or new car? If you answered yes, chances are high that you would want to finance your car either from the dealer or from the bank. The majority of the cars are financed as most drivers can never afford to pay for the new vehicle with cash out of their pockets. Hey, but before you sign on the papers at the shop of the dealer, you may wish to consider getting better interest rates by financing your car through a credit union or a bank.

Who will provide you with a lower rate?

There’s no such thumb rule which will say that the dealer can always beat the rate offered by your bank or credit union. You just need to take into account the fact that dealer financing is in a way bank financing; the dealer does the legwork of approaching the bank on your behalf. This is where there is no definite answer to the question as to who will offer you a car loan at a reasonable rate. With that in mind, there are some benefits and pitfalls of selecting a dealer and the same is the case with choosing a bank.

Financing through a dealer – Is this the best choice?

Many car buyers who wish to avoid heading towards the bank go through the dealer as this is an easier option. They can finance the car and allow you to drive away on the same day. However, that doesn’t mean that the easier way out is always the better way out. The rates of the dealers are marked higher than the rates of the banks and they require being for the dealer to make money. This clearly implies that rates can be higher. Just because dealers send enough business to banks of the entire country, late payment can mean talking to a bank that may not offer you lenient options like your local bank.

However, there are few benefits of dealer financing. One of them is that automakers offer low rates like 0% as their promotion tactics. As this is only true for new cars, it is actually a rate which the banks won’t match.

When is the bank the better option?

The bank holds few benefits which you may not get from the dealer. Since the bank is located near you, you have a good relationship and this will certainly mean that you will have an increased likelihood of making the bank work with you in case you fall back on your payments. The main advantage of the bank is that it doesn’t mark its rates and there will be no such middlemen who will be racking up commissions.

So, in case you’re someone who is looking forward to buying a car, you can first go to your bank to see their offer. If you don’t find it feasible, get a quote from your dealer and stick to the one which offers you better terms and conditions.

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