Is dealership financing worth it?
It can be, but you should still take the time to compare loans from banks and online lenders first. Dealership financing can be quick, but it’s often more expensive than finding financing through a third-party lender. Keep these points in mind when deciding whether or not you want to use dealership financing for your used car purchase:
- Interest rate. Dealerships generally advertise low interest rates to get you in the door. But these are typically reserved for buyers with excellent credit. Getting preapproved at a few third-party lenders first can give you bargaining power when you hit the dealership.
- Down payment. While a down payment isn’t necessarily required by dealerships or lenders, it can help reduce the cost of your loan. When you’re buying a used car, try to have a down payment of 10% to 20% of the car saved up — it can help you save big on interest.
- Car price. Consider the overall price of your car. If dealership financing can help you score a lower interest rate, you still have room for negotiation. Walking in with a preapproved car loan offer already in hand can help give you an edge.
- Extras. Extras like an extended warranty and additional insurance can impact your final loan amount, making it more expensive. Consider these carefully, and remember: No dealership or loan company can force you to take on optional features.