Dealer Finance vs. Bank Loan for Your New Car

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - June 29, 2018

If you’re in the market for a car, you may be asking yourself if it’s better to get a car loan from a bank or through a dealer. In the end, it comes down to what each is willing to offer you.

Bank Financing for Cars

Going to your bank is a great first step toward auto financing. If you have a strong relationship with your bank, you may be able to get pre-approved for a car loan. Banks are direct lenders, and getting pre-approved for a car loan from a bank puts you one step ahead of a dealer – you know what your interest rate is and can compare that number to what other lenders can offer if you choose to rate shop. To find out what you could be pre-approved for, simply meet with the lender at your bank and discuss it with them.

Banks also offer loans to buyers looking to purchase a car from a third party, whereas dealers want you to finance through their lenders and buy a car from their lot. But, the drawback is that banks have specific approval conditions and flexibility can be limited if your credit is less than stellar.

Dealer Financing for Cars

The most common way to finance a car loan is to go to a dealer. Typically, you walk into the dealership, choose a car to purchase, and sit down with their finance department to discuss what you qualify for. The idea of being able to handle everything in one place is attractive to many car buyers. What makes dealers a good option is because of the buyer-incentive programs and promotions they have. Banks typically aren’t able to provide incentives such as zero percent APR or cash-back bonuses. Finally, one of the best parts about financing through a dealer is that many of them have a special finance department. You don’t need excellent credit to get financing, because they are signed up with lenders that are willing to work with unique credit situations.

But, the biggest drawback to financing through a dealer is the interest rate you can get is limited to what the lenders they are signed up with can offer. Also, the dealer can mark up the interest rate slightly because they need to make a profit. This can lead to rates being higher at dealership finance departments compared to direct lenders.

Is It Better to Finance Through a Dealer or Bank?

Where you go to finance depends on your credit situation and the interest rate you can get from different providers. Some banks may turn you away if your credit is poor – even if you do have a strong relationship with them. It isn’t easy dealing with bad credit, and finding the right financing can be even more of a challenge.

If you’re looking to get the financing you need, turn to CarsDirect. We work with dealerships across America that have the lenders available to work with people who have credit challenges. Getting the process started is simple. Fill out our online auto loan request form, and we’ll get to work matching you with a local dealer!

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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