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    Is It Better to Finance Through a Bank or Dealership?

    If you’re buying a car and looking for a car loan, you might have come across the option of financing it through the bank or get it done through the dealership.

    The choice depends on multiple factors, primarily money and time. 

    Although financing through your bank might be cheaper compared to dealerships, getting financed it requires more time and effort.

    All in all, there aren’t many differences between the two options, however, there are a few factors to consider before deciding.

    Read on to learn more about both of these choices and how to pick the one that’s best for you.

    How It Works To Finance Through A Bank

    Banks and credit unions are the most common places to get car loans. If you have a rough idea of the total cost of the car, you can directly approach any bank and apply for pre approval.

    Approval depends on factors such as your credit history, credit score, income, debt-to-income ratio, and more.

    Some banks also accept online applications for car loans. However, bear in mind that before approving the loan, the bank will run a hard credit check and it may impact your credit score temporarily.

    The credit score needed to qualify for a car loan varies depending on the lender and the type of financing.

    It also varies by the type of car, model, and year. That said, people with higher FICO scores and lengthy credit histories get the lowest rates and better repayment terms.

    The APR that you get from the bank is the actual rate and doesn’t include any markup fees.

    You must compare multiple quotes and rates before choosing this option to ensure you save money. 

    How It Works To Finance Through A Dealership

    Financing through a dealership works the same way as getting a car loan from the bank. The only difference is that the dealer will do all the hard work on your behalf.

    You walk into the dealership, choose the car you want, and fill out the loan application. Once you provide the required details, the dealership will submit the application to multiple lenders.

    Next, you’ll be offered a choice from all interested lenders.

    However, be aware that most dealerships will add a markup fee to the actual rate provided by the lenders to compensate for the effort they put into getting you a loan. 

    Some dealerships offer competitive rates on loans for new cars rather than used ones.

    At times, dealerships may also run promotional offers on selected brands, including 0% APR to those who meet the eligibility requirements.

    Overall, when compared to financing through banks, dealerships help save more time and effort.

    Who Offers The Lowest Rates?

    The rates that banks and credit unions offer are comparatively lower than those at the dealership.

    The primary reason for this is the fact that most dealerships add a markup percentage to the actual APR quoted by the lender.

    When you work with the bank, you’re eliminating the middlemen, thus it helps save unnecessary expenses.

    However, a notable benefit of dealerships is that they run promotional offers.

    To make things clear, the rate quoted to you depends on multiple factors such as your credit profile, income, DTI-ratio, and more. 

    Which One Is Right For You?

    In either case, the right option is the one that helps you save money.

    One of the safest ways to ensure that you get the best rates is by getting preapproved from the bank that you have existing relations with.

    Although a preapproval doesn’t guarantee that you’ll get the same rates as quoted, it gives you an upper hand when trying to negotiate these rates.

    When getting approval from banks, it’s a good idea to collect quotes from multiple banks so you can compare and choose the best rates.

    Once you’ve been preapproved, you’ll have an estimate on the standard rate you’ll get depending on your financial profile.

    With this in hand, you can walk down to any dealership and ask them to provide you with a better rate than what you already have.

    In most cases, dealers would try and beat the rate offered so they can get your business and make an extra commission. 


    If you are considering financing a car, it’s extremely important that you understand the process.

    A good idea is to review your credit score before you apply for a loan.

    Additionally, try and save for a larger down payment as it will help lower the chances of going upside-down on the loan.

    Above all, don’t just choose the first offer that comes your way.

    Instead, shop around and compare quotes from multiple lenders so you can select the best option for yourself.