Auto Dealer Financing

There are several ways you can finance your car purchase. One of them is auto dealer financing. Just as with any other auto financing option, this one too has its specifics you should get familiar with and carefully consider before you decide that this way of financing is the best for you.

Pros and Cons of Auto Dealer Financing

The greatest advantage of car dealer financing is that it is very convenient and fast. You buy and finance you automobile at the same place. It is sometimes competitive and often special incentives are offered in order to attract buyers.

However, most of the time, this is where the pros end. Auto dealer financing is rarely the most competitive. The reason for this is that dealers profit from financing too. When you apply for dealer financing the respective department sends your credit information to the lenders they work with. Then they mark up (increase) the lowest interest rate they get and offer it to you. The amount that is marked up is the dealer's profit on the auto financing.

Another disadvantage of dealer financing is that it makes the negotiating process harder. It is much easier and simpler to negotiate just the particular car price when you have already arranged the financing beforehand and go to the dealer as a "cash buyer".

Factors to Consider When Choosing Auto Dealer Financing

So you think car dealer financing is the right option for you. Here are some things to consider:

Try to negotiate the financing terms, including the interest rate. Remember that the dealer is not obliged to disclose the mark-up (their profit on the financing) so try to negotiate a lower interest rate. Make sure it doesn't change during the loan term and avoid any prepayment penalties.

You will be offered an extended warranty on your new vehicle but make sure you really need it before accepting the offer. Also, compare different sources for such warranties since often you will be able to find a more comprehensive warranty, sometimes even at a half price of the one the dealer charges.

Very often you will be offered insurance too while you are financing at the dealership. However, you are not obliged to buy it on the spot so shop around to make sure you get the best rates.

Finally, don't finance unnecessary extra car features and services at the dealership. For example, installing an alarm system at the dealership will most likely cost you significantly more than if you choose to do it at a reputable auto shop.

The auto loan calculators and the information available on this site are intended to serve only as general guidance regarding auto loans. Since they do not take into account your individual circumstances, we cannot and do no guarantee their accuracy or suitability to a specific purpose. We highly recommend you to consider the appropriateness of any information to your objectives before acting on it, and encourage you to consult a qualified professional regarding you particular personal situation.

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