Bank vs Dealer Financing

When you are trying to decide whether you should go with dealer financing or bank financing, you are going to have to look at several different factors. Here are a few things to consider about bank vs. dealer financing when it comes to purchasing a car.


Many people are enticed to use dealer financing because of incentives that are thrown out by the dealer. For example, you might hear an ad from the dealer that says you will be able to get 0 percent interest on a loan. Sometimes, these incentives can potentially save you some money. However, you need to pay attention because many of these incentives are not as great as they make them out to be.

No Transparency

Even though the car dealer might be able to offer you some type of financing incentives, they are going to most likely make up for that in some other area. If you work with a dealer to finance your car, you are not going to be able to see what is going on behind the scenes. They are going to be in control of the trade-in process with your old car, the purchase price of your new car, and the financing. When you combine all of these three variables into one package, there is a lot of room for the dealer to make up money. Instead of letting the dealer handle everything in one big package, you need to work on each portion of the deal separately. This will allow you to stay on top of the deal and avoid being taken advantage of.


One of the big advantages that you could get by working with a bank for your auto loan is being pre-approved before you start shopping. By doing this, you will be able to know if there are any credit problems that you will have to deal with before you go into the dealership. When you get pre-approved, you know that you are going to be able to get a loan that you need. By getting pre-approved, you will also be able to know exactly how much this process is going to cost you. The bank is going to tell you what your interest rate is going to be and how much you can borrow. You will also know approximately how much your monthly payment is going to be. If you have already arranged the financing before you get into the dealership, you will be able to focus on the purchase price and the trade-in value instead of the financing.

Which Is Better?

In the majority of cases, you are going to be able to save some money by using bank financing. Getting pre-approved will allow you to shop around for the best deal on financing before you commit yourself to a car purchase. The only exception to this is if the dealer is offering some type of major incentive by the manufacturer. 

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