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Is it better to finance with a bank or dealership? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools that provide objective and unique content. This allows you to conduct your own research and compare information for free and help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this site come from companies who pay us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other home lending products. This compensation, however, does affect the information we publish, or the reviews you see on this site. We do not include the universe of companies or financial deals that could be available to you.

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4 min read Published August 18 2022

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When it’s time to purchase your next car, you must first determine if you’ll go directly through your bank or directly to the bank to secure vehicle financing. Both provide you with the chance to drive off with a new car, they differ in terms of experience, rates available and loan lengths. What should you consider when choosing between bank or dealership auto loans Be aware of the possible advantages and drawbacks of each option prior to applying for financing. Bank financing The major benefit of going directly to your bank or is that you’ll likely have lower interest rates. Dealers usually have higher interest rates, because dealers apply a markup on the interest rate each time they connect you to a lender. In addition the fact that the credit unions and banks offer a wide range of products so you’re more likely to find an option for financing that is suitable for you. Dealer financing Once you’ve gone through the , you can avail a number of advantages that make the financing process more simple. You can make use of the financing office at the dealership which reduces the amount of time that you’d have to spend looking around for other lenders. Dealerships also often provide manufacturer discounts, which include rebates as well as other . A bank can finance your auto Financing through a bank can be an ideal option for those looking to steer clear of shopping and comparing rates. Benefits of bank auto financing When it is done right the process of financing a car with the bank is an excellent option. Banks tend to provide low interest rates and can be a good option if you need a larger loan. The drawbacks of auto financing at banks However, other bank loans can take longer to process and you might have to apply in person. You also might not qualify for a loan if you have a poor credit score. Consider the urgency of your vehicle loan and the overall health of your credit before making a decision to finance it through a bank or credit union. How do you finance with the bank If borrowing from an institution is the best choice for you, you must first satisfy the eligibility requirements of the bank you choose to use for a loan. Many banks will offer an auto loan minimum and maximum amount, therefore, make sure you check to see if the bank will offer you an auto loan that is suitable for your needs. It is essential that at this point you know what car you intend to finance. Certain banks only finance cars bought through dealer partners. They may have mileage and age restrictions. Try to find a lender which offers refinancing without fees. That way, if your financial situation improves or deteriorates over time, you are able to alter your loan without incurring any additional fees. You’ll also have to request a quote request from your bank. In the process of obtaining a quote you will be able to decide the best term that fits your monthly budget and get an idea of the total cost including interest. When you do decide to move ahead with the application process and the lender will likely request documentation including W2s, recent pay stubs, proof of address and an ID issued by the government. Is bank auto financing right for you? Borrowing money from a bank could be an option for those who require more loan quantity, lower interest rate, or a repayment term that lasts at least five years. Be aware of the disadvantages and benefits of bank financing before taking the final decision. Be sure to evaluate your options. The dealership financing option is a good alternative. A dealership may be a good option if your credit isn’t in the best shape as well as if you’re not in a connection with any banks and credit unions. Benefits of dealership financing The principal advantage of using a dealer to finance your car is the convenience. You don’t need to apply for financing through banks and have to wait days, or weeks, to get approval. Instead, you can simply go to the dealership and then drive home behind the car of your . If you’ve got a , you can have the person accompany you to make the purchase experience a bit more relaxing. Drawbacks of financing through dealerships The initial drawback might appear like a benefit. Dealerships usually offer financing terms that include a minimum of $0 down payment options. While these can make for a favorable monthly payment and the initial cost, you’ll end up paying more interest overall. It is also possible to pay a higher interest rate. Dealership financing is more expensive than standard auto loans even when you have the same credit score. This is because dealers both add a markup to the interest rate they offer and are incentivized to send you to specific lenders even if you can find an APR that is lower elsewhere. How to finance through the dealerships Dealerships partner with major banks as well as online lenders as well as credit unions to offer auto loans via their financing department. This means you will be in a position to finance your vehicle by using a program which the dealer has with a lender, and the dealer will take care of much of the heavy lifting. Once you have been accepted for financing by the dealership, you’ll be directed to the dealership’s finance department to conclude the deal. This process will differ depending upon the particular dealership, but you’ll likely have to fill in a couple of forms and provide proof for income as well as assets. Once you are approved, the finance manager or representative of the auto lender will be able to assist you in reviewing the loan details and then approve the loan. Is dealership financing right for you? The option of financing your car directly through the dealer is the ideal choice if you want to stay clear of the heavy lifting that comes with shopping for vehicle financing. It is also easier to get approved for, so if you have poor credit, financing through the dealership could be more affordable. Tips for taking out an auto loan If you’re applying for your car loan directly through the dealership or through an institution like a credit union or bank it is crucial to apply for prequalification and shop around. Get prequalified If you are applying for financing through a bank or credit union make use of the process. The process is usually offered on the internet and is a fantastic way to get an idea of the amount you’ll be eligible to borrow. It is necessary to have your income, savings and other personal information to be able to complete the procedure. Shop around Once you prequalify look for an loan that is at the same rate as the one you were given. The majority of auto loan rates are negotiated, and the same could be said of charges and duration of loan. Numerous lenders compete for your business, and you should use this to your advantage. Don’t settle for the lender that doesn’t provide favorable terms. Next steps Both dealerships and banks could be alternatives when it comes to financing your new vehicle. However, each has its pros and cons So be sure to shop around to find the best rates and terms for repayment. Learn more

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Written by

This article was written by using automated technology. It was then thoroughly edited and fact-checked by an editor on our editorial team.

Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to manage their finances with concise, well-researched and well-researched content that breaks down complicated topics into digestible chunks.

Auto loans editor

Reviewed by Mark Kantrowtiz Reviewed by Nationally acknowledged Student Financial Aid expert

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

Nationally acknowledged expert in student financial aid

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