Auto Loan Broker

Get Car Financing
Even with poor credit.

By

Automotive Editor

Justin Cupler has specialized as an automotive writer since 2009, and has seen himself published in multiple websites and online magazines. In addition to contributing to CarsDirect, Justin also works as editor in chief for a large performance car online publication. His specialty lays in the high-performance realm, but has a deep love and understanding for all things automotive. Prior to being an automotive writer, he was an automotive technician and manager for six years, but spent the majority of his younger life tinkering with classic muscle cars.

Follow On: Google+ | Website

, Automotive Editor - November 9, 2016

A good auto loan broker can frequently get clients lower rates, but dealing with a direct lender is sometimes a better option. Learn how to make the call.

An auto loan broker can be the key to getting the best rates and terms on a car loan. They are generally independent businesses that have developed relationships with a wide variety of lenders. These relationships give the broker an advantage in negotiating that most buyers would never have.

A car loan broker has information on interest rates and qualification guidelines from multiple banks and car loan lenders. With this information, the broker has the tools to shop for the best rates and terms for your loan. Typically, car dealerships have an employee, commonly known as the financing and insurance (F&I) manager who does work similar to a loan broker.

Buyers with good or excellent credit often never consult with auto loan brokers as their bank is typically willing to give them a great deal without any haggling. However, those with bad credit find that an auto loan broker may be just what they need. Many lenders will try to take advantage of those with damaged credit due to a bankruptcy or a few late payments by offering exceptionally high interest rates on car loans. Luckily, there are ways to combat this, and that's where a good auto loan broker can help.

See what kind of interest rates you can get >>

Once the broker has run the buyer’s credit, she will have a good idea of which lenders will be able to offer a loan. One of the biggest advantages of using auto loan brokers are strategies for getting even those with severely damaged credit approved financing. Additionally, they know where the best rates are. A loan broker will also be able to tell the buyer how to get those rates. They may advise the buyer to provide a slightly larger down payment or consider a less-expensive car, as well as provide other useful tips that will help you reduce the interest rate on your next auto loan.

You will pay for the service, though. Think of a loan broker as the middleman between the buyer and the lender. The lender gives the broker a loan with the equivalent of a "wholesale" price; then the broker passes it along to the buyer with a "retail" price with slightly higher rates than the lender gave her.

Loan Brokers vs. Direct Lenders

Direct lenders have their own money, and they are lending it directly to the buyer. Going with a direct lender cuts out the middleman—i.e. the broker—but the company is still trying to make a profit off of your loan. Most direct lenders are banks or credit unions that offer loans. The main difference when working with a direct lender is that you're not shopping around around for the best rate from several companies—your only option is the rate offered by the lender.

Get A Free Car Loan Quote >>

How to Contact Auto Loan Brokers

There are many ways to find an auto loan broker that service a specific area, but the quickest way is an Internet search. Most of the time, you don't need to actually see the loan broker in person as they can simply email you the application, have you fill it out and fax, scan or email it back to them.

Asking friends or colleagues about their last car purchase is another way to find a reliable broker. It could be that a friend also used the services of a loan broker to negotiate their last car loan. This method usually is the most direct approach, and sometimes provides the most accurate information on a loan broker.

Banks are accustomed to working with auto loan brokers, and will probably have a list of them. See an officer at local bank and ask them if there are any they would recommend.

With a list of broker names in hand, start the interview and elimination process. Call or email the brokers you are considering and ask some questions regarding their services. Some useful, and suggested, questions to ask are:

  • How long has the broker been in business? Longevity is a good sign of success, and suggests a thorough knowledge of the auto loan industry. Look for veterans in the business.
  • Does the broker charge a fee? If the broker answers "yes" to this question, forget that broker immediately. Brokers receive substantial commissions from lenders to help facilitate loans and bring the lenders new loan customers. Basically, the lender pays the broker—not the buyer.
  • Does the broker work with multiple lenders? Choosing an auto loan broker that has many lender options can help you increase the chances of being approved for a car loan. Also, more lender options means the broker can work to get a lower interest rate or better payment terms.

Working with an auto loan broker is a little less convenient than applying for a loan directly from a bank, but a broker can usually get a better deal than a dealer can. Brokers are normally paid by the lenders; therefore, it does not cost anything to use their services.

Auto loan brokers make their money from referring customers to different lenders. While this may seem like a conflict of interest, most auto loan brokers are ethical business people that want to please their clients so they will refer friends and family to them in the future. They generally work very hard to make sure their clients can get the best rates and terms available for their loans.

Potential Drawbacks of Working with Car Loan Brokers

Any auto loan broker will have multiple connections in the lending industry, allowing them to collect offers from car dealership captive finance companies, banks, and credit unions in a short period of time. The buyer can then compare the finance company, credit union and bank car loans they’ve been offered to find the best deal prior to applying. This all sounds very convenient, but there is also a downside to working with car loan brokers.

  • They add a degree of separation. When hiring a car loan broker, the broker becomes the "middleman" between the buyer and any potential lenders. If the lenders have any questions which the buyer isn’t on hand to answer, they might find themselves with less-favorable loan terms, or rejections. This can reduce the available options, and force buyers to settle for more expensive or restrictive loan terms.
  • They may put fast approval before maximum savings. Getting the buyer loan offers is a broker's business, and that may place a priority on getting approved loans over looking for the best possible rate.
  • They may use lenders with restrictive terms. Car loan brokers have connections to a lot of lenders, but this doesn't mean they have connections to all of the lenders that would be willing to give the buyer a loan. Buyers should consider asking the broker for a list of all the lenders they submit queries to, and see if there are any they're missing. Even if they've only skipped one local lender, that could be the lender that would have given the buyer the best loan terms.

Car loan brokers can save buyers time searching for lenders and make it convenient to weigh out options, but they may also narrow the options and cost more money in the long term. Be sure to do plenty of research before deciding between a broker and a direct lender.

Need a Car Loan?

It only takes a minute.

, Automotive Editor

Justin Cupler has specialized as an automotive writer since 2009, and has seen himself published in multiple websites and online magazines. In addition to contributing to CarsDirect, Justin also works as editor in chief for a large performance car online publication. His specialty lays in the high-performance realm, but has a deep love and understanding for all things automotive. Prior to being an automotive writer, he was an automotive technician and manager for six years, but spent the majority of his younger life tinkering with classic muscle cars.

Follow On: Google+ | Website

Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.