Should You Find a Car Loan Yourself or Let the Dealership Handle It?

Deciding whether to find a car loan yourself or let the dealership take care of it can be a daunting task. This article explores the pros and cons of each approach, helping you make an informed decision that benefits you financially. Whether it's a new or used car, understanding your options can save you a significant amount of money in interest and fees.

Competing Against the Dealership's Lenders

One effective strategy is to gather loan options from your bank or credit union first. This initial step is crucial because it helps you understand the lending terms and rates you qualify for at a local financial institution. Armed with this knowledge, you can then approach the dealership, which often has more options and sources due to its higher volumes of loan transactions. Dealerships typically offer better rates because they have established relationships with multiple lenders that may not be available to individual borrowers.

Dealership’s Edge in Lending

Dealerships usually have the upper hand when it comes to car loans. They often secure better rates due to their large volume of transactions, which allows them to negotiate favorable terms with lenders. However, this doesn't mean that you should always go to the dealership first. The key is to be knowledgeable about current bank and credit union rates. Once you present this information to the dealership, you can see if they offer the best deal. If the dealership is aware that you are knowledgeable about rates, they are likely to match or come close to the terms you've found elsewhere. This approach leverages your financial knowledge to ensure you get the best possible deal.

Dealership’s Lower Rates and Promotional Offers

It's not always advantageous to let the dealership take care of finding the loan. The type of car you're purchasing can significantly affect your decision. For new-car purchases, manufacturers often offer low-interest promotional loans, which are difficult for local banks to match. These offers can provide substantial savings over the course of the loan. In contrast, for used-car purchases, you might find better deals at your local bank or credit union. They often have more flexible terms and rates that cater specifically to used-car buyers.

Overcoming Credit Issues

When your credit score is less than ideal, finding a loan can be challenging. However, dealerships are often the only option for those with poor credit. In such cases, they may be willing to offer loans with higher interest rates but still at a favorable rate compared to other lenders. On the other hand, if you have good credit, joining a credit union can be a smart move. Credit unions often offer the best car loan rates and can provide you with the financing you need at a lower rate.

Conclusion

Ultimately, the choice between finding a car loan yourself or letting the dealership handle it depends on your individual circumstances. By researching and comparing the loan terms and rates from your bank or credit union, you can make an informed decision. This approach ensures that you secure the best deal, whether it's a new or used car. Being knowledgeable about the current market and rates can significantly impact the final financing terms you receive, making your car purchasing process more secure and cost-effective.