Why is it a bad idea to finance a car through a dealer ship?

Answer 1

It is not a bad idea assuming they can match or beat your bank. Get approved with a rate from your bank then go to the dealer. When you get into the finance office explain to them the rate you have and make them at least match it. Dealers are indirect lenders that can make a profit on rate. Meaning they may get the rate for 5.5% but the can mark it up to 8.5% and get 80% of the profits on the rate. Keep them honest but financing through them saves run around time.

Former New and Used car Sales and Finance Manager

Answer 2

It's not that it's a bad idea.. in fact.. it could be a GREAT deal. The point is, you won't know unless you've researched what financing is available from multiple outside sources.

Sometimes a dealership might charge a higher interest rate because they figure you won't bother to shop around and it's more convenient for you to do one-stop-shopping with them.

Other times, a dealership might change a lower-than-market interest rate--or better--give you a zero interest rate loan, as a loss just to move the car off the lot and reduce their inventories.

That's why, you need to check the rates at various places, i.e. banks, finance companies, credit unions, etc, and then see how they stack up to the one offered at the dealership.

Then.. take the best deal around!

That goes for a car lease (money factor) as well as a loan.

Happy shopping!

Answer 3

It's bad because the dealership will make alot of their money on the sale by giving you a higher interest rate on the loan than what you really qualify for. This can turn into alot of money for the dealership especially on 5 year loans. I would recommend getting a loan through your own bank.

Better yet, dont buy a car you cant afford to pay cash for and then get liability only insurance.

http://www.chevy.ws/

Answer 4

The interest is way higher unless you qualify for the promotional.

Credit unions offer 5.5% and banks something about 6%. Dealers wont do anything under 8% unless you qualify for the promotional APR. They are a business and their business is to rip you off.

Answer 5

you may be able to do better at your own bank, and maybe not. to those that say car dealerships are just there to "ripp you off" obviously have never worked in the industry. car dealerships on the average work on about a 3% profit in relation to revenue. not many business owners would be willing to invest their hard earned money for that type of return.
to make such a generalization is pure ignorance.

Answer 6

You can finance a car cheaper through your credit union or bank.

Answer 7

they charge up to 20% interest, and can take the car back if you are ever3 days late on a payment. Go to the bank

Answer 8

they offer much higher interest rates than an outside lender would

Answer 9

WAY HIGHER THEN YOUR BANK