Whats the difference between dealership financing and getting financed thourgh your bank??

Answer 1

Dealership financing: they charge you whatever interest rate they want.

Bank financing: aka preapproval...you know exactly how much your loan is for, you know what your payment is, and you know your interest rate BEFORE you set foot on the lot. This reduces the risk of the dealership taking advantage of you no matter how great or bad or your credit is. Dealerships hate preapproval because they don't make any money off your loan. Now...let's say you don't have a pre-approved loan waiting to be used. The dealership will run your credit and tell you "oh, your interest rate will be 10%' You sign the docs and go home. A few days later they call you back telling you you have to resign your loan docs b/c the bank will only approve your loan at 15% and if you don't agree that's okay but you have to give back the car. What they don't tell you is that the bank approved your loan at 10%, but when you sign the line for the 15% the bank still accepts it and the extra 5% is kicked back to the dealership every month. This is called 'dealer reserve.' So it's always best to have a pre-approved loan in hand when buying a car.

Answer 2

Definitely get bank financing if you can, unless you qualify for some of those low factory financing rates like GMAC has with the really low interest. If you go in with a pre approved bank loan, you already know how much you can spend and what your payments will be, so you can research the car you want and know what it is worth and make an offer.When you do dealer financing the salesman always starts with asking how much you can pay a month, that puts you in a disadvantage, because then they just add more months of payments to get down to the payment you want. You need to stay focused on the total price of the vehicle, because like alot people you may want a different car in 3 or 4 years, and you don't want to be stuck owing way more than your car is worth because you still have over 3 years left of payments.
It gives you a little more leverage to have the financing taken care of ahead of time. Remember, you can always walk out if you don't feel comfortable with deal before you sign on the dotted line. Good luck!

Answer 3

First, this is usually the case with used cars for sale.
New car dealers are different.

Used car dealers will charge you a much higher interest rate however they will be more willing to give you credit. Depending on your state the interest could be as high as 37% !!!!
Check out the link below for how they do it with the "Rule of 78". Dealers in some states can charge interest on the orginal balance despite how much you have paid down the principal. They have a liscense to steal !

If your credit qualifies, use bank lending.

Now if your dealer obtains your loan from a bank for you, than it would be the same as if you with to the bank. Either way you must have good credit to qualify.

I am speaking about dealer "in house" or "we tote the note" financing. They make a ton of money. And usually they require a down payment that equals or exceeds what they paid for the car at auction or trade in.
I know a salesman that does dealer finance and he makes $10,000+ a month in commisions. He gets paid for selling the car and then he gets a fat fee for selling you the note.

In general you may pay triple or more in interest over the life of the loan with a dealer financing compared to a bank with a simple interest loan.

Finally, if a loan agreement says "Rule of 78 applies" run like hell and find an honest deal.

good luck

Answer 4

It really depends on the dealership. If you are financing through GMAC or FMCC, then it's pretty much the same as a bank - a bank that just happens to be owned by the car company. They will offer you more options, usually, than any commercial bank will. If you are buying through what we call a "rock lot", then the interest rate will be very high if they "finance" it themselves. Watch out for these credit crooks as they will charge the highest interest rate allowable by law, usually 25%. If you have a good working relationship with your credit union, I would give them your business.

Answer 5

Whenever possible, finance through your bank. The dealership may literally rip you off with their financing package if you are not financially knowledgeable and sophisticated.

The dealership knows they may only sell you one car in their life. They want to maximize profits on that one sale. Your bank wants you as a long-term, repeat customer. Consequently,they are more likely to treat you fairly and honestly.

So, get a quote for a loan from your bank. Then get a quote from the dealership. READ all of the fine print! Compare the loans. The bank offer will probably be the best one (unless the car company - not the dealership - is offering low rate financing, such as 0% for 3 years).

Best wishes and good luck.

Answer 6

well one thingis interest rates some dealers offer o% but read the fine print It might be for only 6 months If u have bad credit a dealer can almost find a credit co to finance u but again be carful after 2 years u can still owe as much as the price of the car because y r paying 95 % of the interest an 5 % of the princaple .Bank will give u a stright deal and can even get a better deal from dealer Go to bank get a preaprovel than go shoping as dealer or sales man after he has worked up a price sheat Than how much less if i pay cash now just go to bank get money buy car

Answer 7

I don't know if this would always be the case, but I financed through my dealer, and this is why: I went to my bank to see what interest rate they would give me, and the dealer offered me a lower rate. Later, I found out the dealer was using my bank as the lender! So I still was able to have the payment come out of my account automatically (and easily) and paid less to do it.

Answer 8

None, except the dealer arranging the loan for you and getting a commission from the lender. You pay for the convenience. There are many car manufacturer lenders (GMAC, Ford Motor Credit, etc) with very good rates now, and available only through a dealer.

Answer 9

Besides possible interest rates and who has the title, the dealerships bank or your bank, nothing really.

Answer 10

ONE WILL HAVE BETTER RATES AND ONE WILL NOT....