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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.Loan.com 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.
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.
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
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 for
Borrowers 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
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?
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.
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.
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
Some dealers can approve you in a day. However, others may take one to two days, some can even take up to a week.
Yes. If you’re a member of a credit union, you’ll likely find highly competitive rates for auto loans.
Typically loan approval lasts for 60 days. If you don’t move forward with the loan in this timeframe, you’ll have to reapply.
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