Finance Options: Your Bank Vs. Dealership Options
Purchasing a new car can be an overwhelming task. Even though it is exciting, emotional and a symbol of your success, from finding the perfect vehicle to the right financing option, buying a new car comes with its fair share of struggles. You might have done a lot of research to find the vehicle model that gives the best mileage and has the best safety ratings. But have you thought about how you will finance your dream car?
Although paying cash upfront is the best option since there is no interest cost. If you are not financially able, there are other financing options that you can opt for. These include either going to your bank or a dealership. In this blog, we will be discussing both the new car finance options to help you make the right decision. So, before any further ado, let’s dive in!
Financing Your Car Through the Bank
Getting a vehicle loan from a bank is a wise option for many people, especially if you are going to a bank that is already involved in business with you. Since they know you well and have a good relationship, the bank will be willing to offer you a lower interest loan than a dealership. Moreover, the bank may also offer you incentives as you will be doing all your banking under one roof.
When you finance a vehicle through a bank, you have the option and freedom to shop around at several institutions to find the best offer or terms for your credit history and budget. In addition to this, you also have a better chance of working with a professional and easily approachable customer representative when needed.
While some dealerships will often try to hook you on a car that is more than what you can afford, a bank will look at your whole picture first and develop a loan program that suits your unique needs and is sure that you can pay off. Out of both the new car finance options, this will help you select the right bank and avoid future surprises (high-interest rates or unexpected payments).
The only drawback of financing through a bank is that if you have a bad credit history, your options can be limited, and the interest rates offered with the loans could be higher compared to those offered by a dealership. Also, there might be an origination or admin fee that increases the overall cost of the loan.
What is better than finding the car of your dreams, an affordable payment plan, and being able to drive your car out on the road within just a few hours of signing off on the deal? This is precisely what an automotive dealership does. They help you in finding a good vehicle and a suitable payment plan. Basically, when a dealership helps you in arranging your finances, they benefit in both ways; they make money on your purchase and on your financing.
A dealership simply does that by working as a broker with a lender with whom they already have a good working relationship. They arrange a loan on your behalf and gain on the interest you pay. The two main reasons why a dealership loan is considered one of the best new car finance options is because:
- They offer good loan programs even to people with poor or bad credit scores.
- They have multiple lenders within their reach. Hence, they will help you in finding the perfect deal.
Although dealerships allow you to have access to zero or low-interest manufacturer deals, they are only limited to brand new vehicles. So, if you are planning to buy a used car, there is a high chance that the dealerships might require a sizable downpayment. Therefore, do your homework before signing up for a vehicle financing option.
The Verdict | How to Choose between New Car Finance Options
In all situations, it is best to choose the new car finance options that will save you the most money. However, it is not always easy to know what that financing choice is upfront. Therefore, in such cases, you should go to your bank first and get a preapproved loan quote. Next, visit a reliable and trusted dealership and ask them for a quote for car loan options as well. Now compare both the options – dealership and bank – in order to find out which makes more sense, is more affordable, and benefits you financially in the long run.
Another important factor here is your credit score. If you have a bad credit score out of the two new car finance options, the one that will work best for you will be a bank even with a high-interest rate, they will offer you a beneficial deal. Whereas, a buy here and pay here dealership isn’t recommended if you are financially unstable as they demand a 10 to 20% down payment.
Regardless of which of the new car finance options available you go with, remember that you are the one who has to take care of the monthly payments. Hence, do your research, read and understand the terms and conditions, and select a financing option that works best for your needs and budget.