Direct Car Finance Advantages and Pitfalls

Buying a new car with a direct car finance option is a great source of financing as opposed to going to an outside source for your car financing. A direct car financing company is a company that is part of a parent car company. These direct car finance companies have some great benefits as well as some pitfalls to avoid.

Smaller Down Payments

Because a direct car financing company is a part of the overall car manufacturer they can offer loans with smaller down payments. In some cases, a down payment can be avoided and the car company waits for the consumer to start making their monthly payments.

Smaller Interest Rates

Because the direct car financing company is owned by the car manufacturer, they have a lot of buying power at their disposal. They are not locked into any type of interest rate. This can be transferred to the consumer in the form of smaller interest rates. However, this is at the discretion of the direct car finance company. Usually this is allocated to consumers with outstanding credit history.

Bad Credit Financing Available

When someone can not secure financing from other areas, they have a good chance of getting financing through a direct company. This is because the direct car finance company is loaning out money on their own product. They will be able to make it up in the event of default.

Locked into Certain Makes

Working with a direct car finance option makes a lot of sense when dealing with a particular make of car. However, if you wanted to buy a different car from another manufacturer, you would not be able to use their financing options. They are limited to their own brand of vehicle.

Short Terms

Another pitfall to direct car finance is that they generally operate on shorter terms. Most auto loan lenders will operate under longer terms to be able to generate more revenue through interest. A direct loan financier will only operate under shorter terms, up to 36 months, to keep their money liquid.