Do you want to buy a car but are worried about the finances? You have two options: a car loan or dealer financing. While many people assume that it is an individual choice, making the right decision saves you time and money.

Before going into which one is better, here are their differences.

Bank Loan

You can approach a bank or limited authority lender for your loan. Each loan has specific requirements and eligibility criteria. Interest rates, repayment terms, loan amounts, and conditions also vary.

Of these, personal loans are the most straightforward and versatile type. You can apply for this kind of loan for any personal purpose, such as:

  • Payment of medical expenses
  • Going on vacation
  • Purchase of a vehicle
  • Home repairs, etc.

You go to the bank directly to get the loan approved and choose a car at the dealership later. Almost everyone with an average to excellent credit score qualifies for a loan. After getting the pre-approval, the bank runs a hard credit check before you make the purchase.

Most lenders have a digital process that is easy to use, and borrowers can get personalised rates. Besides, personal loan amounts are credited within one business day. With a specific loan amount approved, you can avoid unnecessary add-ons pushed by the dealer.

Dealer Financing

Here, the dealer takes care of the loan application on your behalf. But first, you will have to choose the car and fill out multiple credit applications. So, you can compare rates and terms offered by several providers.

However, this step can adversely affect your credit score. Whenever you send in a loan application, it counts as an enquiry and shows up on the credit history. When lenders view it, they may think you are desperate to get car financing and reject the application.

Even if that is not the case, the interest rates can be far higher than a car loan. The dealer also charges compensation for handling this process, making for a higher final payment. In short, it means you don’t have all the necessary information.

Auto Finance: Bank vs. Dealership

Now, you may have understood that you need to skip dealer financing because of the additional costs.

Here are the compelling reasons.

Less Choice

When you look for funding on your own, you choose the bank. But with a dealer, it is not possible; you have a selective presentation. They are looking to make a profit and show you higher rates. Besides, they have tie-ups with specific lenders and can’t give you unbiased recommendations.

With personal loans from the nation’s best and award-winning providers, you get transparent advice. They also don’t treat you like money-making machines but empathise with you and value your needs.

Combined Sales

Dealer funding means two sales rolled into a single package – the car and your loan. But you go there only to buy a vehicle, where you have 100% freedom to choose. As they sell you two products, it is expected that they conceal some details.

With car loans, there is no such issue as your lender will have no hidden agenda. You can use their loan calculator to get indicative interest rates. Once the credit check finishes and the loan is approved, you pay reasonable amounts with the best deals.

Unwanted Stress

With car financing, you have ample time to research and compare banks. You can sign the contract with an adequate understanding of the loan terms, ongoing fees, etc. But at the dealership, you have little time to think, causing much confusion and stress.

When you are not aware of the minute details, it is possible to make a wrong decision. Suppose the repayment amount is too high and you miss a few dates, it can not only put a strain on your financial position but also affect your credit rating.