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Finance through the dealership or get an auto loan?
There are advantages and disadvantages to both.
Heres a guide to help you decide whether financing through a dealership is the right choice for you.
There are several types of financing offered through dealerships.
it’s possible for you to then compare the loan terms offered and pick the one you prefer.
Manufacturer Financing
The auto manufacturer provides this pop in of loan through the companys financing division.
Often referred to as captive lenders, manufacturer loans exist to promote the brands car sales.
They are frequently featured with special low interest rates on specific terms or car models.
Examples of manufacturers lending arms include Toyota Financial Services and Ford Credit.
Did You Know?
These loans may have higher interest rates or require a larger down payment.
Regular payments are made to the dealership, sometimes in more frequent intervals than the typical monthly installments.
That translates to some potential benefits for the buyer.
Dealerships make this process easy by handling the paperwork and quickly getting loan rates and approvals.
This streamlined process typically gets you in and out with your new vehicle on the same day.
Higher Interest Rates
Some dealerships will mark up their rates to make a profit.
Pressure To Buy Add-Ons
Dealerships sometimes bundle loans with other extras, such as extendedwarrantiesor added features.
Risk of Longer Loan Terms
What would you like your monthly payment to be?
Watch out for this.
When you answer, theyll adjust the loan terms to lower your monthly payment.
If youre flexible on the car you want, research the current promotional offers from various manufacturers.
Car dealerships have a streamlined financing process that removes much of the effort and paperwork on your end.
This likely will mean less appealing terms.
Avoid financing at the dealership if you fall into these categories.
A preapproval can be a strong negotiating tool.
However, if the dealer cant beat it, youre better off going with the outside loan.
Final Thoughts: Is Dealership Financing Right for You?
Getting an auto loan through a dealership can be a good option for some buyers.
Much of the decision comes down to your financial situation, goals and priorities.
Preparing in advance before you enter the dealership can pay off.
You may also want to research what special financing deals are being offered by manufacturers.
it’s possible for you to learn more about GOBankingRates processes and standards in oureditorial policy.
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