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Direct auto finance: what exactly is it, and is it an ideal idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct your own research and compare information for free to help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that are advertised on this website are provided by companies that pay us. This compensation may impact how and when products are featured on this site, including for instance, the order in which they may be listed within the categories of listing in the event that they are not permitted by law. Our mortgage home equity, mortgage and other home lending products. But this compensation does not influence the content we publish or the reviews that appear on this website. We do not cover the universe of companies or financial offerings that could be available to you.

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3 minutes read. Published October 21, 2022

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Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as scholarships, 529 plans, education tax benefits and student loans.

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Indirect auto is when a lender offers financing to the car seller rather than directly to the purchaser. The seller then transfers the loan to the buyer, and the buyer is required to make each month regular payments to the lender whom the dealer is connected with to pay off the loan. This approach to vehicle financing comes with benefits and drawbacks therefore it is crucial to know all the choices before you sign off on the indirect car loan. Indirect auto financing: What exactly is it? Indirect auto financing can be obtained through from lenders in their network of partners. Instead of looking for an loan and then getting preapproved prior to going to the dealer and obtaining the financing when you purchase the car. In turn, the seller will receive an amount of commission or another type of payment to connect you with the lender. This can be in an amount of percentage that’s added to the interest rate. If you pay the final payment then the lender will release the lien or title for the automobile to the. For the duration of the loan duration, you’ll also be charged fees on the loan like you would with a . Others indirect loans Indirect loans can also refer to the process of making use of brokers or marketplaces. These options let you fill in your personal information and are matched with any or all lenders. In most instances, your credit score won’t be impacted since these online marketplaces only require a soft inquiry. Furthermore, you will be able to view potential loan offers that include the estimated monthly payments, the time frame for repayment and the interest rate to help you make an informed decision. Before you decide on one, you’ll also want to evaluate the cost of all loans. Pros and cons of indirect financing While indirect financing can help you have a more seamless car-buying experience However, there are some disadvantages to think about before you make a move. Pros of indirect financing In some cases, it makes more sense to . Shop and buy in one place. It’s usually more convenient to purchase from the dealership. You’ll be able to browse and get financing on the next day. Less legwork. While it’s a good idea to do so, it’s not necessary. If you want to go without contacting other lenders prior to deciding on your vehicle. Bad credit options available. Specialty dealers have options for those with less than perfect credit. Cons of indirect financing Before you visit the dealership without the approval of an outside lender, consider these drawbacks. Higher rates. The dealership usually adds a percentage on top of the rates offered by lenders that meet your requirements. This means that you will probably get a direct lender. Not having the same control. You don’t get to choose the lender your information is shopped around with. If you already work with a credit or bank union, it may be beneficial to sign up with it. You may obtain a better price or better terms that otherwise. Unavailable for some purchase types. If you’re planning to purchase from a , indirect financing will obviously not be an alternative. How to get indirect auto financing The procedures for getting the indirect financing for your vehicle are comparable to the procedure for a traditional loan. But before you apply ensure that you have all the documents available that the dealer has to send to the lender’s on their network. This step-by step guide will show the steps to take: Visit the dealership. Look around and select your car. Apply for a loan in the car dealership. Acceptance is granted and you can choose the most suitable offer. Sign your loan documents. You can take possession of your . Alternatives to indirect auto financing If you don’t want to obtain the indirect car loan via a dealer There are a variety of alternative options to finance your next car. Bank Most banks offer loans for vehicles, although it is an involved process. If you have good credit the bank might be the way to go. But if not are not, it might not be the most viable option. Credit unions function similarly to banks, but members who are members of the institution will be the primary focus rather than investors. You’ll likely have to join the credit union and the membership requirements will vary from one in the same way. But joining a credit union that has auto loans will save you money and offers greater flexibility. Online lender Utilizing an online lender is another possibility to finance a car without having to go through a dealer. A lot of online lenders concentrate on offering low rates and fair loan terms, as opposed to the high commissions you could find at a traditional dealership. Indirect auto financing is a great option to finance your next car. It is important to research you do your research prior to visiting the dealer as there could be an alternative that is better. You may also find that the dealer will match or beat an outside loan offer to gain your business. Learn more

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Written by

The article was created by using automated technology. It was then thoroughly checked for accuracy and editing by an editor from our editorial team.

Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with clear, well-researched information that dissects complicated topics into bite-sized pieces.

Auto loans editor

Reviewed by Mark Kantrowtiz Reviewed by Nationally recognized expert on student financial aid

Mark Kantrowitz is an expert on student financial aid including the FAFSA and 529 plans, scholarships educational tax benefits, student loans.

Nationally acknowledged expert in student financial aid

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