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When it comes to securing a car loan you have two main options: going through the dealership or obtaining a loan at your local bank. Each option comes with benefits. Realistically it depends on the kind of vehicle you’re buying, how long you want the loan to last, how much you can afford to pay per month and also what your credit score is. Each of these specifics will play a role in which car loan option is right for you.
The Benefits Of a Dealership Loan
Securing a car loan through your dealership does come with some major benefits. Throughout the year you’ll find dealerships offering special low to now interest loans on certain cars. Now in order to be able to qualify for these particular car loans you will need to meet or surpass a specific credit score (if your credit score is low to average you likely will not qualify for the loan). The repayment period is also usually 48 months, so you’ll need to pay the loan back in this four year window. As long as you can do this and you qualify for the dealership loan this will probably be the best way to go.
However, the low to no interest rates are only for either brand new vehicles or possibly certified pre-owned vehicles. If you’re shopping for a used vehicle this kind of a low to no interest rate will likely not be available to you.
Another benefit of the dealership loan is you might have a bit more wiggle room. You may be able to negotiate taking a certain vehicle for a slightly different interest rate or you might be able to finagle certain add on benefits if you agree to a shorter repayment schedule. Because bot the sale and the loan is under the same roof the dealership will have some additional leeway in altering the loan.
Benefits Of a Bank Loan
With a bank loan your bank will already have your financial information, so it’s easier to apply for a loan. They know your financial history, savings, and other data, so you won’t need to provide as much information when applying for the loan. In order to qualify for the low to now interest rates at the dealership you need to buy a specific model at a specific time frame and have a good to excellent credit score. If you don’t check one of these boxes you won’t qualify for the low to no interest, which also means you might end up with a higher interest rate on your loan. By applying through your bank you will be approved for a specific amount of money and for set interest rates, regardless of the vehicle you’re interested in.
After you’ve been pre-approved for a bank loan (you should do this first) you can use it when considering a dealership loan. The dealership will want to best your bank to get your business, so they might try to undercut the interest rate. In this instance it is always best to have options as it will help you secure more favorable loans.
Look Into Both Options
There’s nothing wrong in looking at your options. Both your bank and the dealership provide car loans, so looking at each through your own financial situation will help identify what works best for you. Your best bet might be to identify your loan options through your bank prior to going to the dealership. This way, you already know what your bank offers right in your back pocket. From there you can then see whether or not the dealership can beat the bank. Having this information is a win-win for you. After all, the more options you have access to the more likely you’ll find a payment that works for you.