Understanding Direct vs. Indirect Auto Financing

Get Car Financing
Even with poor credit.

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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.


, - March 5, 2019

There are two options for auto financing: indirect financing or direct financing. Both have the same goal of getting you a car loan, but they aren’t the same. So, which type of financing do you choose? Let’s take a look at the differences between them.

Direct Auto Financing

Direct auto financing is when you apply for a car loan at a bank or credit union. If you have a good relationship with either one, the loan officers could pre-approve you for auto financing.

This gives you an advantage because you’re given a loan and interest rate, and you can go about finding a vehicle knowing what you can spend. Plus, when you’re rate shopping, you can compare offers to your pre-approval.

If you’re looking for an auto loan and have bad credit, getting direct financing could be more of a challenge. But it doesn’t hurt to check with your bank or credit union first.

If you have a good credit history, but maybe a stumble due to an event beyond your control, they may be able to pre-approve you. Ultimately, it depends on your credit score and relationship with the lender.

Indirect Car Financing

Indirect auto financing, on the other hand, is when you get auto financing through a dealership and their lending partners. The dealer works with you by making sure your application is filled out, and that you have the proper documents. They submit the completed application to a lender or lenders, and you can see what you qualify for.

If your credit is in good shape, you could also be approved by captive lenders that are attached to a specific manufacturer, such as Toyota Financial Services, GM Financial, or Ford Credit.

When you have bad credit, however, you aren’t going to be able to walk into any dealership and get approved. Your credit is a big deciding factor in a car loan approval, and if you struggle with credit, you probably need to work with a subprime lender.

It isn’t easy to find these types of lenders, since subprime lenders only work through special finance dealers. You could find yourself being turned down again and again if you’re not searching for the right dealership.

Where Do You Find Bad Credit Auto Financing?

The good news is you don’t have to drive around town going from dealer to dealer looking for auto financing. We can do the searching for you, and you don’t have to leave your home.

CarsDirect is teamed up with one of America's largest networks of bad credit car dealerships. We've helped millions of people get new and used auto loans with our quick and hassle-free process. Simply fill out our no-obligation car loan request form to get the process of getting connected to a local dealer started right now!

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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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