Written by: Extended Auto Warranty
Last updated: January 24, 2025
Buying a new car can be incredibly exciting, with many possibilities and choices. However, one of the most important decisions you will have to make is how you will finance the vehicle. Depending on your situation and the options available, there are a few different methods of getting the financing you need to purchase.
Two of the most popular financing options are through the dealer, where you’re buying the car, or through a bank. Knowing what each method offers will help you make the right choice.
Benefits of Financing a Car Through the Dealer
When you buy a car through a dealership, you will often have the option to get preapproved financing through them. Dealers work exclusively with banks of their choice to offer their customers auto financing, which can be a good way to get the auto loan terms you need. Knowing the benefits of dealership financing will allow you to decide if it is right.
Convenience
More so than anything else, financing a vehicle through the dealership is your most convenient option. Having everything related to the vehicle under one roof makes the dealership your one-stop shop. Plus, you do not have to deal with multiple institutions at the same time to get the financing you need. Dealer financing is a great choice if you know what car you want and like the dealership where you have found it.
Dealer-Specific Incentives
One big upside to financing a car through a dealership is that you can sometimes get great deals. Dealerships often have incentives, rebates, and discounts available to people who finance their vehicles in-house. This is especially true during holidays such as Labor Day or Memorial Day. If you are able to take advantage of one of these deals for a lower interest rate or down payment, it could be the best option for you.
Bad Credit or Poor Credit Options
If you have a less-than-perfect credit history, financing through the car dealer could be a way to get a loan for a new car. Most of the time, banks will want you to have the best possible credit score before approving you for a car loan. Because approval is at the dealer’s discretion when you finance a vehicle through them, you could get approved for an auto loan, whereas you wouldn’t be able to otherwise. This can be especially helpful if you are trying to build credit and get your score higher.
Benefits of Financing a Car Through the Bank
Aside from getting financing for a new car through the dealership, the other most popular option is to get an auto loan from a bank. The loan you get doesn’t always have to be through a bank that you personally use, which opens up some options for you. Having a good understanding of the benefits of bank financing will help you make your decision.
Lower Interest Rates
When you finance a vehicle through a bank or credit union, you will almost always get the best possible interest rates on the market. Banks will offer lower interest rates because they do a higher volume of loans on a day-to-day basis. If you have a good credit score, financing through a bank will be your cheapest option in the long run. The lower the annual percentage rate (APR) is for your auto loan amount, the less the vehicle will cost by the time you have paid off the loan and made all the monthly payments.
Ability to Get Pre-Approved
Perhaps the biggest benefit of getting car financing through a bank is the ability to get pre-approved. Before setting foot in a dealership, you can know how much you can afford to spend on a car. This helps you narrow down your choices and can also help you avoid being upsold by salespeople since you have a set limit on what you can spend. You won’t have to worry about any unexpected surprises when the time comes to sign the paperwork.
Allows You to Shop Around
Depending on the financial institution through which you decide to get your auto loan, you may get a better or worse interest rate. When you get your loan through the dealership, you are stuck with whatever loan rate they give you. When you work with an outside bank, you can shop around and get estimates from multiple institutions. This helps you find the right lender for your needs and get the best overall deal.
What to Consider When Choosing Between Financing Through the Dealer or Bank
The most important thing to consider when choosing between financing through a dealer or a bank is your specific financial situation. Depending on your credit score, you may be better or worse off getting your loan through one or the other. Taking the time to fully assess your financial needs and how they may affect the deal you get will help you choose wisely and save as much money as possible.
You should also consider how much work you want to put into finding the best deal. In some cases, the convenience of getting your financing through the dealership will be worth more than any money you are saving by shopping around for different bank loans. If you want to save time, financing through the dealer could be your best option, but it may not be the cheapest.
Protect Your New Car With an Extended Warranty
As a car buyer, no matter how you decide to finance your vehicle, you should do everything possible to protect it. With an extended warranty, you can get the help you need to make repairs as soon as they arise so you and your new or used car can get back on the road.
Finding the right extended warranty will give you peace of mind whenever you are behind the wheel, with extras like 24/7 roadside assistance and rental car coverage. Explore our extended warranty provider reviews and buying guide to determine which extended warranty will work best for you and your vehicle.
