If you're purchasing a new car, you may be wondering whether it's better to finance through a bank or dealership. Everyone hopes to get the best deal possible when financing a new car, so it's important to know the difference between these two options to select the best one for you. Today we will dive into that topic and explore what your options are when looking for a car loan around Schaumburg.
Dealer Financing
When financing through a dealer, the dealer arranges your financing with a third party. This means that the dealer collects your information and forwards it to prospective auto lenders. If the lender(s) choose to finance your loan, you'll get quoted an interest rate to the dealer called the "buy rate."
Financing through a dealership has many advantages:
- Dealers are more likely to work with you to help you get the best rate possible. They're also willing to consider more than your credit score when considering rates.
- Because dealers work with a variety of lenders, multiple lenders are competing for your business, which can lead to a better rate.
- Applying is easy. You'll only need to fill out one form to get multiple options.
- Some dealerships offer options for those who have issues with credit.
- The dealership may offer special rate financing or other incentives.
Bank Financing
Auto loans through a bank are applied for directly, either online or in-person. Decisions can take as little as 60 seconds, and if you're approved, you'll be ready to purchase a new ride immediately. With an approved loan you get quoted on an interest rate, loan term, and maximum loan amount.
Why choose an auto loan from a bank?
- Having a pre-existing relationship with a bank can help secure a great rate. You may find the best rates by securing your own financing from the place where you normally bank.
- Banks may be able to set a flexible payment schedule for your loan.
- Some banks provide you with a pre-approval authorization. This allows dealers to quickly retrieve your information and start your purchase.​
- Other banks actually provide you with the funds. If you're given the funds directly, you can write the dealership a check for the price of your new vehicle.
Dealer vs. Bank: Which Should You Choose?
To ensure you get the best rate possible, compare what the dealer can offer with a pre-approved auto loan from the bank. When you arrive at the dealership prepared, with a pre-approved offer, dealers may be able to ask or negotiate with one of their lenders to get you a loan with better terms. It's always worth filling out a loan application at the dealership and at the bank, to see what deals and incentives you might qualify for.
No matter what route you choose, always take time to research your options. If you apply at many different locations, be sure to do so within a short span. Spacing these inquiries out too much could have a negative impact on your credit score.
Get Financed at Patrick Volvo
If you have additional questions about your financing options, feel free to contact our financial advisors at Patrick Volvo. The experts in our finance center near Schaumburg will be happy to address your concerns and walk you through the financing process!
Interested in a new or pre-owned Volvo? You can apply for credit online, then visit our dealership to take a test drive and finalize the paperwork.
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