{"id":766566,"date":"2019-03-07T00:30:53","date_gmt":"2019-03-07T05:30:53","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=766566"},"modified":"2025-02-19T14:16:10","modified_gmt":"2025-02-19T19:16:10","slug":"dealer-finance-vs-car-loan","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/car-loans\/dealer-finance-vs-car-loan","title":{"rendered":"Car loan vs dealership financing"},"content":{"rendered":"

There are a number of options when it comes to financing a new car. Two of the most popular methods are dealer financing and new car loans. It\u2019s important to know the difference between these financing options in order to know which one is right for you.<\/p>

The main difference between a car loan vs dealer financing<\/h3>

The main difference between a car loan vs financing from a dealer is in how you apply. If you borrow through your dealer, they\u2019ll typically send your details to multiple lenders to see which ones will approve your loan. With a car loan, you apply directly with one lender and can even get a quote on your rate before you submit your application.<\/p>

Because dealerships have a relationship with these lenders, they might have room to negotiate. However, you won\u2019t be able to compare lenders yourself and could potentially find a better deal if you took control and applied for a car loan yourself.<\/p>

Car loan vs dealership financing: a breakdown<\/h4>
<\/th>Dealership financing<\/th>Auto loan<\/th><\/tr><\/thead>
Interest rates<\/strong><\/td>
  • Can offer lower interest rates than car loans<\/li>
  • Low interest rates may only be available for promoted makes and models<\/li>
  • Commission for the car salesman may push rates up<\/li>
  • 0% rate deals may indicate a higher purchase price for the car<\/li><\/ul><\/td>
  • Lenders offer various rates, which means you can choose the most competitive<\/li>
  • Using your car as collateral lets you take advantage of lower rates<\/li><\/ul><\/td><\/tr>
Loan term<\/strong><\/td>
  • Typically 3- to 7-year terms<\/li>
  • A down payment is generally required<\/li>
  • Early repayment costs may apply<\/li><\/ul><\/td>
  • Choose terms between 1 and 7 years<\/li>
  • Early repayment costs differ between lenders<\/li><\/ul><\/td><\/tr>
Benefits<\/strong><\/td>
  • The dealer finance representative handles the paperwork<\/li>
  • No need to shop around for better offers<\/li>
  • Gives you leverage to negotiate the sale price, interest rate and loan term<\/li><\/ul><\/td>
  • A range of competitive car loans are available<\/li>
  • Your car loan is repaid in full at the end of the term<\/li>
  • You can choose your lender and loan type<\/li>
  • Loans are available for new, used and classic cars<\/li><\/ul><\/td><\/tr>
Drawbacks<\/strong><\/td>
  • It\u2019s usually only available for newer vehicles<\/li>
  • Down payments can be a large upfront cost<\/li><\/ul><\/td>
  • Higher interest rates may apply to certain types of loans<\/li>
  • Upfront and ongoing fees may apply<\/li><\/ul><\/td><\/tr>
Who it\u2019s best for<\/strong><\/td>Borrowers who want to buy a new car and have a down payment<\/td>Borrowers who want to shop around and have the option of buying from either a dealer or a private seller<\/td><\/tr><\/tbody><\/table>

Compare car loans<\/h3>
\n
\n <\/div>\n
\n
\n