When you purchase a car, unless you pay for it in cash, you will secure a loan from a lender for it. The two main ways to secure an auto loan are known as dealership financing and direct lending. With direct lending, you go directly to a bank or another financial institution and negotiate the terms of your loan. With dealership financing, the dealership acts as a mediator between you and the financial institution. Ultimately, your loan will still be held by the institution financing it, but you will only negotiate with your dealer.
There are benefits and drawbacks to both methods of financing and which one you choose will depend on your personal preferences as well as your current credit history. However, below are several reasons why you should consider dealership financing.
Dealership Financing Is More Convenient
Perhaps the top reason why many people choose dealership financing is that it is convenient. With dealership auto financing, you shop for your vehicle and your loan at the same location. You deal with only one person as opposed to several people at different locations, meaning you do not have to coordinate between your lender and your dealer. Alternatively, with direct financing, you will have to go to one or more lending institutions and then go to one or more dealerships before you find a combination of loan and vehicle that works for you.
Dealership Financing Is Often Faster
When you finance your vehicle purchase through the dealership where you are buying your car, you can often complete your purchase in less than a day. Autotrader.com estimates that signing papers and securing your vehicle will take about two hours if you already have your financing approved or six hours if you go into the dealership without any previous contact. Alternatively, securing a direct loan through a bank often takes longer than a day as loan officers are assigned many different tasks and your credit may be checked more thoroughly.
While shopping for a car will likely take more than a day, if you already know which vehicle you want and you need a vehicle immediately, dealership financing may be your best option.
Dealerships Can Offer Lower Financing Rates
People often assume that direct lending offers lower interest rates than dealership financing. In many cases, this is correct. For instance, if you get a loan from your main banking institute, you may get a discount rate in exchange for having an active bank account and/or enrolling in direct payments. However, if you are not getting a direct loan from your main banking institute, you may actually get better rates from a dealership.
A dealership can offer special discounts that they have negotiated with lending institutes ahead of time. Additionally, a dealership can check several different lenders to see who will offer you the lowest rate and help you secure that rate. For example, a dealership may be able to secure factory financing from the vehicle's manufacturer, which you would likely not be able to secure on your own.
Dealerships Can Accommodate Poor Credit Histories
Often, dealerships can accommodate clients with poor credit histories while direct lenders may be unwilling to do so. Because the dealership has relationships with multiple lending institutions, it is likely that your dealer can find one that will work with you. However, if you have poor credit, you should be aware of the interest rates that you are offered and decide between purchasing a car immediately or working for the next few months to repair your credit and try to get a better rate.
There are several reasons to consider dealership lending. If you need to finance a new car, you should see a dealer in your area. You can click this link to contact one.
