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Do you prefer to finance with dealers or a bank? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive tools and financial calculators, publishing original and objective content. We also allow users to conduct research and compare data for no cost and help you make sound financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this site come from companies who pay us. This compensation can affect the way and where products are displayed on this site, including for instance, the sequence in which they appear within the listing categories in the event that they are not permitted by law for our mortgage home equity, mortgage and other products for home loans. However, this compensation will have no impact on the information we provide, or the reviews you see on this site. We do not cover the vast array of companies or financial offers that may be available to you.



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4 min read Published August 18 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 from late 2021. They are passionate about helping readers gain the confidence to manage their finances with clear, well-researched information that breaks down complex subjects into digestible pieces.







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

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









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If it is time to purchase your next vehicle, you must first decide whether you will choose to go through your bank or the itself to obtain vehicle financing. Although both provide you with the chance to drive away with a new car, they differ in terms of experience, rates available and loan lengths. Which is better? Bank or dealer auto loans Consider the potential benefits and drawbacks of each option prior to applying for financing. Bank financing The major advantage of going straight to the bank or is that you'll likely get low interest rate. Dealers tend to have higher interest rates because dealers will add a markup to the interest rate each time they connect you to a lender. Additionally, banks and credit unions offer a wide range of products, which means that they are more likely to provide an option for financing that is suitable for you. Dealer financing Once you've gone through the process, you'll be able to take advantage of several perks that will make the process of financing simpler. You will be able to make use of the financing office at the dealership which reduces the amount of time you be able to shop around with other lenders. Dealerships also often offer manufacturer offers, such as rebates, as well as other . Bank financing for autos The bank you finance your car through can be a great alternative if you want to avoid and feel confident shopping and making comparisons of rates. Benefits of auto financing from a bank When done correctly, financing a car through the bank is an excellent idea. Banks are more likely to offer low interest rates and are a great alternative if you require an additional loan. Drawbacks of bank auto financing However, outside bank loans can take longer to process, and you might have to apply in person. Also, you may not be eligible for an loan when you have a poor credit score. Consider the urgency of your vehicle loan and the overall health of your credit before making a decision to finance it through an institution like a credit union or bank. How do you finance with an institution If financing with an institution is the best option for you, you first must satisfy the eligibility requirements of your bank to qualify for a loan. Most banks have an auto loan minimum and maximum amount, so make sure to check if your bank can provide you with the auto loan that is suitable for your needs. It is essential that at this point you are aware of the car you want to finance. Certain banks will only finance vehicles purchased through dealer partners. They may be able to impose mileage and age limitations. Find a lender that offers fee-free refinancing. That way, if your financial situation improves or declines in the course of time, you can adjust your loan without additional hefty costs. It is also necessary to obtain a loan from the bank. When you get a quote you will be able to decide what term best fits your budget each month and also determine the total cost, including interest. If you decide to go through with the application, the lender will likely request documentation like W2s, recent pay stubs as well as proof of address and an ID issued by the government. Do you think bank auto financing is right for you? Borrowing money from a bank might be a good option if you need a larger loan size, lower interest rate, or a repayment term that lasts 5 years or more. Take a look at the drawbacks and advantages of bank financing prior to making a decision and make certain to research your the options. Auto financing through a dealership is an option for you if your credit isn't in good state, and you don't have an existing relationship with any bank and credit unions. Benefits of financing through a dealership The principal benefit of using a dealership to finance your vehicle is convenience. You don't need to go through a bank and potentially have to wait days, or weeks, to get approval. Instead, you can simply visit the dealer and then drive home behind the car of your . Plus, if you have an, you can let the person accompany you and make the buying process a little more relaxing. Drawbacks of financing through dealerships The initial drawback might appear to be a good thing. Dealerships generally offer financing options which can include zero option for down payments. While these could result in an affordable monthly payment and initial costs, you will be paying more for interest in total. It is also possible to get a higher interest rate. Dealership financing is more expensive than standard bank auto loans regardless of the credit rating. The reason is that dealers add a markup to the interest rate they offer and are also enticed to direct you to certain lenders, even if you could find an APR that is lower elsewhere. How do you finance with dealers Dealerships collaborate with big banks as well as online lenders as well as credit unions to offer car loans via their financing department. This means you will be in a position to finance your vehicle by using a program with the company with a lender, and the dealer will take care of most of the lifting. If you're accepted for financing by your dealership, you will be directed to the dealership's financing department to conclude the transaction. The process for approval will vary based on the dealer, however it is likely that you need to fill out a few forms and provide documents for income as well as assets. If you're accepted, the finance manager or a representative from the dealership's auto lender can assist you in reviewing the loan details and finalize the loan. Is dealership financing right for you? A direct loan to your vehicle through the dealership is the best alternative if you're looking to avoid the heavy lifting involved in shopping for vehicle financing. It's also easier to get approved for, so if you have poor credit or a bad credit score, financing through the dealership may be more accessible. Guidelines for obtaining an auto loan If you're applying to get your auto loan directly through the dealership or via an institution like a credit union or bank it is essential to make an application for prequalification, and then shop around. Get prequalified If you are applying for financing through the credit union or a bank you should take advantage of the process. The process is usually offered online and is a great opportunity to determine of how much you will be able to take out. It is necessary to have your income, savings and other personal information to be able to complete the procedure. Find out more about the loan once you have been prequalified look for a loan at the rate you were given. The majority of auto loan rates can be negotiated and the same could be said of fees and the length of the loan. Many lenders will compete with you for your business, and you can use this to your advantage. Don't settle for a lender that does not offer favorable conditions. Next steps Both dealerships and banks can be viable alternatives when it comes to financing your car. However, each has its pros and cons So be certain to do your research to find the most favorable rates of interest and repayment terms. Learn more


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Written by

This article was generated by using automated technology. It was then thoroughly verified and edited by an editor on our editorial team.



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

Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to control their finances with concise, well-researched and well-researched content that breaks down otherwise complex topics into manageable bites.






Auto loans editor


Review by Mark Kantrowtziz. Reviewed by Nationally acknowledged scholar financial aid specialist

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






Nationally acknowledged expert in student financial aid




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