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Direct auto finance: what is it, and is it a good idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive tools and financial calculators as well as publishing unique and impartial content, by enabling you to conduct research and compare information at no cost - so that you can make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site come from companies that pay us. This compensation may impact how and when products are featured on this site, including such things as the order in which they may appear within the listing categories in the event that they are not permitted by law. Our mortgage home equity, mortgage and other home loan products. However, this compensation will affect the information we provide, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offers that may be open to you.



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3 minutes read. Published 21 October, 2022
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The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances with concise, well-studied facts that break down otherwise complex topics into manageable bites.







Reviewed by Mark Kantrowtziz Reviewed by Nationally recognized student expert in financial aid

Mark Kantrowitz is an expert on student financial aid, the FAFSA, 529 plans, scholarships, education tax benefits and student loans.









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Indirect auto occurs when an lender gives financing to the seller of the vehicle rather than directly to the purchaser. The seller then passes the financing to the buyer, and the buyer is required to make regular monthly payments to the lender that the dealer has a relationship with in order to pay off the loan. This method of financing vehicles has its advantages and disadvantages, which is why it is essential to know all the options prior to signing any indirect vehicle loan. How can you get indirect auto finance? Indirect auto financing can be obtained through from lenders in their partner network. Instead of seeking an loan and getting preapproved before visiting the dealership to get the financing once you buy the car. In turn, the seller collects the commission or some other form of payment for connecting you with the lender. This can be in an amount of percentage added to your interest rate. After you have made the final payment then the lender will transfer the title or lien for the automobile to the. During the loan period, you'll be required to pay interest on the loan the same way as you would with a . Other loans that are indirect loans Indirect loans can also refer to the process of using a marketplace or broker. With these options, you input your personal details and then are matched to one or more lenders. In most instances, your credit score won't be affected since these online marketplaces only require the submission of a soft inquiry. Furthermore, you will be able to see potential loan offers that include the estimated monthly payment, time frame for repayment and the interest rate to help you make an informed choice. Before you select one, you'll also want to compare the total cost of the loans. Pros and cons of indirect financing While indirect financing could help you get a more seamless car-buying experience, there are also drawbacks to consider before moving forward. Pros of indirect financing In certain instances, it is better sense . Shop and purchase in one place. It's generally easier to purchase at the dealership. You can shop and secure financing the on the same day. Less legwork. While it's a good idea to but it's not essential. If you wish to go without having to apply with different lenders before deciding on your next car. Bad credit options available. Specialty dealers have options for customers with less than perfect credit. Cons of indirect financing Before you go to the dealership without a preapproval from an outside lender be aware of the drawbacks. The higher rates. The dealership often will add a percentage to the top of what is offered by lenders who meet your needs. This means that you'll most likely be able to get an direct lender. Not as much control. It isn't possible to select which lender your personal information is traded around with. If you are already working with a bank or credit union, it could be beneficial to apply with it -- you may obtain a better price or better terms that you would otherwise. Unavailable for some purchase types. If you're looking to buy directly from a lender, then indirect financing won't be an option. How to obtain indirect auto financing The steps for obtaining direct auto finance are similar to the process to obtain a traditional loan. However, before applying make sure you be prepared with any documents the dealer will need to provide to the lender's within their network. This is a step-by-step guide on how to move forward: Visit the dealership. Explore the options and pick the car you want to drive. Apply for an loan in the car dealership. Acceptance is granted and you can choose the best offer. Sign your loan documents. You can take possession of your . Alternatives to indirect auto financing If you're not looking to get an indirect auto loan from a dealer, there are several other options for financing your new vehicle. Bank Most banks provide loans for cars, but it is an involved process. If you have good credit the bank might be the way to go. However, if you don't have a poor credit score, this may not be the best choice. Credit unions operate similarly to banks, but members who are members of the institution will be their primary focus rather than investors. It is likely that you will need to be a member of the credit union and the requirements to join differ from one institution to the next. But joining a credit union that provides auto loans can save you money, and also give you more flexibility. Online lender Using the internet as a lender is another possibility to finance a car without having to go through a dealer. The majority of online lenders are focused on offering affordable rates and reasonable loan terms, rather than the high commissions you could get at a traditional dealership. The bottom line Indirect auto financing can be a practical way to purchase your next car. But, it's essential to ensure you before visiting the dealership since you may find an alternative that is better. It is also possible that the dealer will compete with or beat an outside loan price to win your business. Find out more


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Written by

The article was created by using automated technology. It was then thoroughly edited and fact-checked by an editor on our editorial team.



The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances through providing concise, well-studied information that breaks down complicated topics into bite-sized pieces.






Auto loans editor


Reviewed by Mark Kantrowtiz Reviewed by Nationally recognized student financial aid expert

Mark Kantrowitz is an expert on student financial aid The FAFSA, 529 plans, scholarships as well as tax benefits for education and student loans.






Nationally anerkannt student financial aid expert




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