Is a Bank or a Dealership the Best Way to Finance a New Car?

When you purchase a vehicle, you have a couple of financing options available to you. You can pay cash for the car, or you can finance it. Most people don’t have a lump sum of money to pay for a car in full, so they are in the position of financing it. When financing your new vehicle, you can turn to a bank, or get financing from the dealership. You want to have all the information needed to decide whether a bank or dealership would be the better option. The information below will help you decide.

Bank Financing

Going with bank financing has a lot of benefits to it. Not only is it a very convenient way to finance your car, but it’s also fairly easy. You’ll have a loan officer who helps you through the entire process. Since this is the majority of what they do every day, they are very well versed on how to help you while keeping you informed of all your options and the terms of the loan.  Before you go to purchase a car, you’ll want to go to the bank and apply for a loan. After looking at your financial situation, employment, credit history and other factors; you’ll be pre-approved for a certain amount. This way, you know what your budget is while your car shopping and helps you avoid an awkward situation when you try to purchase a car that’s more than you can be approved for.

Why it May be More Convenient

Your bank may be able to get you a lower interest rate, especially if you are a current customer of the bank you choose to get a loan from. A lower interest rate means smaller monthly payments or a shorter loan term. In the long run, this means you’ll be paying less for your car.  If you obtain a car loan through your own bank, you can add the loan to your banking account, making it simple for you to pay on the loan each month by logging into your online account and paying directly on the loan.

Dealership Financing

Going with dealership financing allows you to obtain financing directly through the same dealership you’re buying the car from. When you obtain financing through a dealership, you need to exercise caution.  A car dealership gets commission from loans they are able to sell to those buying cars from their dealership. This means you need to be sure you pay very close attention to all the terms of the loan and read all fine print for yourself before signing anything. Make sure you are familiar with the actual lender and don’t agree to a loan from an unknown lender. Going with an unknown lender can lead to problems with your loan later on.

Things to Be Aware Of

You also want to verify the interest rate and make sure you are well-aware of all the fees being included, as well as the final cost, monthly payments, etc. If you don’t have excellent credit, you may find yourself paying a much higher interest rate than you would have if you went through a bank. However, if you have good credit, you can get some good interest rates from a dealership, especially when they’re clearing out their inventory.

While each person will have to look into which option is the best for their own individual needs, banks offer pre-approved loans with the assistance of a qualified loan officer. There are generally no surprises and no worries over whether or not things are being glazed over in order to make a deal happen. For these reasons, a bank loan tends to be the best way to finance a car for many.

 

 

 

loans - 13 Dec, 2014 - No Comments