Disadvantages Of Auto Loan Companies

The auto loan process is complicated in that there is a lot of unfamiliar jargon and so many auto loan companies to choose from. How do you know which is the right one? Finding a good car loan lender can be daunting because you don’t want to end up paying more than you want to, but when getting a car loan, it is good that there is so much competition among lenders. This typically translates into better rates and terms. There are however, some disadvantages to dealing with auto loan companies rather than a traditional lending institution such as a bank, credit union, or car manufacturer’s lending agency.

Customer Service

When you go to a bank, credit union, or even a dealer, you receive a certain type of customer service impossible to get from a virtual lender. The ability to talk to a real person sometimes makes all the difference in the world and is enough to lead people down a more traditional route of auto financing. This, of course, applies only to online auto loan companies, but that is where they predominate. If you are seeking a lender to whom you can pay a visit, chances are it is one of the traditional types.

Rebates…or Lack Thereof

One of the greatest advantages of visiting a car dealership to secure financing and make your purchase are rebates. You have to remember to ask because it will not necessarily be offered, but the opportunity to receive cash back on your purchase or be able to eliminate any negative equity you have on your car with a rebate is valuable. Rebates are a feature you will not find with third party lenders who simply make loans. They do not control the price or incentives on the cars for sale.

Manufacturer Incentive

Much like rebates, car dealers are able to offer incentives that come directly from the car maker. Depending on economic conditions, a car manufacturer might be looking to move a large amount of units, so they offer enticing incentives such as cash back, very low APR, or extended periods without having to make your first payment. Auto loan companies don’t have this luxury. That is why you should do your homework and find out what sorts of deals are out there.

Expertise

A car loan broker is someone who works for a dealership but who does not approve the loans. Their job is to connect borrowers with lenders, and because they work in volume, they have fruitful business relationships with particular lenders. Sometimes the lenders are a branch of the car maker like GMAC, designed to make loans to purchasers of their products. Other times they are different lenders. When you work with a car dealer, you have a middleman, true, but their business connections can prove valuable to you, for they might be able to secure an interest rate that no amount of haggling on your part could hope to get.  

Among the disadvantages of financing a car purchase through an auto loan company are less customer service and expertise and that you miss out on factory rebates and incentives. The first two apply primarily to online auto loan companies, but even still, financing agents at banks, credit unions and dealerships work everyday with customers, helping them to get the best rates and terms possible for their car loan. The rule applies: buyer beware. You want to thoroughly examine all of your options, weighing the pros and cons before you decide where to go for car finance.