Should you finance your car purchase through the dealer or through a bank? This is a question that has baffled customers for many years. Below, you’ll learn how it works with both, and you should know by the end which solution is best for you!
Going Through a Bank
As the name suggests, this solution will see you going through a bank to obtain a loan. You’ll speak to a bank, talk through your circumstances, get pre-approval, and then contact the dealer to purchase the vehicle. Usually, the bank writes a letter of commitment which you can then pass across to the dealer. Essentially, you’re telling the dealer that you have a loan ready and accessible for the purchase.
These days, it’s usually possible to apply online, and this keeps the whole process simple. When you find a vehicle, the lender then runs a more serious check into your finances (known as a hard check). If your credit report is strong, you shouldn’t have an issue getting a loan from the bank.
Despite the positives, one issue that customers encounter is the restrictions placed on the bank loan. For example, they may restrict the mileage and age. Generally speaking; however, loans are available for both new and used cars.
Choosing the Dealer
As you may have guessed, choosing the dealer means that you remove the middleman from the process. Instead of getting a loan from the bank and using this money to buy a car from the dealer, you’ll simply take a loan from the dealer itself. In much the same way, you’ll need to complete a credit application to ensure that you’re in a position to take a loan.
The dealer normally submits the application to various lenders, which gives you a choice of loans. At this stage, we recommend comparing terms and rates (you don’t want to be left with unfavourable terms and fees!).
One of the biggest benefits of choosing the dealer is that you benefit from promotional interest rates in many cases. Depending on the model, you might even enjoy a 0% APR when buying a new vehicle.
Meanwhile, some dealers don’t need to send your application to several lenders because they have an in-house financing system. In particular, if you were to purchase from Collishaw Auto used cars, these dealers are happy to work with people with people who have low credit scores. Some dealers try to avoid looking at the report at all costs. If you have poor credit (or perhaps even no credit), this is the best option.
Rather than getting rejected from a bank, you’ll get assistance as well as the vehicle of your dreams. Since everybody has a unique financial position, these dealerships will consider your circumstances and try to work on a solution that benefits all parties. As well as personalized terms, you should also get reasonable rates with the right provider.
So Which Is Better?
With this, you’re probably left with the question of which is better? Ultimately, the answer is to consider your own finances and choose the solution that meets your needs. For those with poor credit or a lack of credit, it’s best to choose a dealer that offers finance because a bank will likely reject all applications.
Another advantage of choosing auto financing with a dealer is that you cut out the middleman. Rather than inviting another party to the discussions, all you need to worry about is yourself and the dealer. As mentioned, many dealers tailor their auto service to meet your needs.