How to decide between a car loan or dealer finance |
car loan vs dealership

Compare dealership finance vs. car loans

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

Save money by knowing your options before you jump into dealership finance or a new car loan.

There are a handful of options when it comes to financing a new car. Two of the most popular methods are dealer financing and new car loans. It’s important to know the difference between these two financing options to select the best one for you. Car Loans Car Loans

Get matched with a local car dealership to finance your car purchase. Bad credit, no credit OK.

  • Specializing in 'buy here, pay here' car loans. No banks or credit unions.
  • Typically hear back from a rep within 24 hours.
  • Free loan-matching service. No obligation offers.

    Dealership financing vs. auto loans

    Dealerships financing generally come with extremely low interest rates by, usually if you make a down payment or by trade in your car.

    Auto loans, on the other hand, are secured loans that use your car as collateral. Lenders give you a lump sum payment to purchase your car, and offer more competitive rates than you would with an unsecured loan. However, if you default on your loan you can lose your vehicle.

    Dealership financeAuto loan
    Interest rates
    • Can offer lower interest rates than car loans
    • Low interest rates may only be available for promoted makes and models
    • Commission for the car salesman may push rates up
    • 0% rate deals may indicate a higher purchase price for the car
    • Lenders offer various rates, which means you can choose the most competitive
    • Using your car as collateral lets you take advantage of lower rates
    Loan term
    • Typically 3-year terms
    • A down payment is generally required
    • Early repayment costs may apply
    • Choose rates between 1 and 7 years
    • Early repayment costs differ between lenders
    • The dealer finance representative handles the paperwork
    • No need to shop around for better offers
    • Gives you leverage to negotiate the sale price
    • A range of competitive car loans are available
    • Your car loan is repaid in full at the end of the term
    • You can choose your lender and loan type
    • Loans are available for new, used and classic cars
    • You need good credit to be eligible
    • It’s usually only available for newer vehicles
    • Down payments can be a large upfront cost
    • Higher interest rates may apply to certain types of loans
    • Upfront and ongoing fees may apply
    Who it’s best forBorrowers that want to buy a new car and have a down payment.Borrowers that want to shop around and have the option of buying from a dealer or a private seller.

    Compare car loans

    Rates last updated September 21st, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

    Select your credit score range

    I don't know my credit score

    Finally, select where you live.

    To get your credit score:

    Experian logo

    Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Minimum Credit Score Term of Loan Requirements Car Loans
    Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
    Varies by lender
    Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
    Auto Credit Express Car Loans
    Get connected with an auto lender near you, even if you have bad credit.
    Typically 3 to 6 years
    Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
    LendingClub Auto Refinancing
    Lower your monthly car payments and save on interest through a fast and easy online application process.
    Fair or poor credit
    Minimum of 2 years
    Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
    MotoRefi Car Loan Refinancing
    A car loan connection service for borrowers looking to refinance.
    1–6 years
    Must have an income of at least $2,000/month and have a vehicle with less than 100,000 miles. Car Loans
    Get up to four offers in minutes through one simple application. Multiple financing types available including new cars, used cars and refinancing.
    24 to 84 months
    Must have a Social Security number; make $24,000+/year; have no open bankruptcies.
    LendingTree Auto Loans
    Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
    Typically 1 to 7 years
    Must be a US citizen and 18+ years old. Must have good to excellent credit.
    Capital One Auto Financing
    You could qualify for a car loan of up to 40000, but not all dealers accept this bank's financing.
    Good to excellent credit
    36 to 72 months
    Valid street address; existing Capital One accounts in good standing. Car must be a 2006 model or newer with less than 120,000 miles.
    Wells Fargo Auto Loans
    Auto loans with high loan amounts to cover your car purchase or refinancing needs.
    Good to excellent credit
    1 to 6 years
    Your income and assets must support your existing debt obligations and the desired loan amount.

    Compare up to 4 providers

    Dealer financing & car loan side by side

    Who saved more money?

    Julian and Clay have both purchased new cars for $20,000 each. Julian opts for a car loan while Clay takes on a financing option from the dealership — so who chose the better financing option?

    Car loan

    Julian’s car loan comes with a 7% rate for a five-year period and pays $396 in monthly repayments. At the end of the loan he’ll pay a total of $3,761 in interest, amounting to $23,761 when all said and done.

    Dealer financing

    Clay, who takes on dealer finance, will pay $283 each month for the term of his loan. But his $5,000 down payment means he’s only charged interest on $15,000, resulting in lower ongoing repayments.

    When the loan is paid off, Clay will have paid a total of $21,980. That’s $1,781 less than Julian.

    Bottom line

    Convenience always comes with a price and that extends to the dealer-financed car loan. Before settling for what a dealer can offer, compare outside banks, online lenders and credit unions. In many cases, you’ll find terms that are better than the dealer’s.

    No matter what route you choose when car shopping, always put in the time to research so you understand how to get the most out of your options for car loans.

    Frequently asked questions

    Was this content helpful to you? No  Yes

    Ask an Expert

    You are about to post a question on

    • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
    • is a financial comparison and information service, not a bank or product provider
    • We cannot provide you with personal advice or recommendations
    • Your answer might already be waiting – check previous questions below to see if yours has already been asked

    Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Privacy and Cookies Policy and Terms of Use.
    Go to site