Car Dealership Financing

Car dealership financing lets you shop for a vehicle, arrange the loan and drive it off the lot all in one exhilarating visit. Dealerships make money by taking a cut of the interest you pay on your loan.

They also have access to specials from the auto manufacturers, including rebates and 0% APR offers. Still, it’s best to go into the dealership with a preapproved loan in hand.

Convenience

Car dealerships are more willing to work with people with less-than-perfect credit than traditional banks. They can approve financing for buyers with a lower credit score and offer different loan terms, including annual percentage rates (APR) and the length of the loan.

Dealerships may also offer manufacturer incentives, such as lower financing rates or cash back on certain models. However, these programs are typically limited to specific cars and may have other requirements, like a higher down payment or shorter contract length.

Getting preapproved for a car loan before visiting a dealership can save time and give you more negotiating power. It can also help prevent the dealer from trying to sell you add-ons you don’t need. These extras can include everything from gap policies and window etching to extended warranties and service contracts. Be sure to ask the price of each add-on before you agree to it. Then, you can compare it with the prices of other add-ons from different dealers and lenders.

Flexibility

One benefit of Car dealership financing is that it provides more flexibility than traditional bank financing. This is because you can get pre approved for your loan before you even step foot in a dealer’s showroom. This means that you know your credit terms in advance, including the annual percentage rate (APR), the maximum loan amount and the total borrowing costs.

This way, you can compare offers from different dealers on an apples-to-apples basis and more easily catch any add-ons that may be hidden in your contract. It will also give you leverage when negotiating a lower interest rate.

Dealerships often tack on extra fees like document, destination and advertising charges in addition to the actual purchase price. However, these fees are usually negotiable and can be negotiated down or eliminated altogether by shopping around. In some cases, the dealer may even offer these services for free as part of a manufacturer incentive. This is another reason why it’s important to always do your research.

Taxes

Car dealerships have to collect any applicable sales or similar taxes on the vehicles they sell. The amount of these fees will vary by state, and in some cases are negotiable. New York, for instance, has documentation fees, which are collected by the dealer to cover document preparation and filing costs. These fees average about $75. Some states also have market adjustment fees, which are based on factors like supply and demand.

Other types of dealer fees might include the dealer markup of interest rates and longer loan terms, which can add thousands to your total cost over time. Getting preapproval for financing through your bank or another lender before you head to the dealer may help cut these fees down. The best way to minimize dealer fees is by knowing what you’re paying for before you get the keys. This way, you can negotiate the best deal possible. This will ensure that you get the best value on your new vehicle.

In-house financing

Dealerships offer in-house financing to make car purchases easier. These loans are arranged by the dealership’s finance department and typically sold to a bank or credit union that will service the account and collect payments. Auto dealerships often profit from providing this type of financing, and their interest rates may be higher than those offered by direct lenders.

It’s a good idea to shop loan offerings before visiting a dealership. This will allow you to avoid a markup and secure a better rate, which could save you money in the long run.

Some dealerships have captive financing companies that offer attractive promotional incentives, like 0% APR auto loans. However, these types of offers are usually only available on new vehicles and for customers with pristine credit. In addition, the terms of these loans can be restrictive. As a result, it’s often better to get a loan from a bank or credit union.