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Indirect auto financing: 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 better financial choices by offering interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and compare information at no cost - so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, 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 website are provided by companies who pay us. This compensation can affect the way and where products are displayed on the site, such as, for example, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other products for home loans. However, this compensation will affect the information we provide, or the reviews that you see on this site. We do not include the vast array of companies or financial offers that may be available to you.



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3 minutes read. Published October 21, 2022
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This article was written using automation technology and thoroughly checked for accuracy and editing 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 by providing clear, well-researched facts that break down complicated topics into bite-sized pieces.







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

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









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Indirect auto occurs when a lender provides financing to the seller of the vehicle instead of directly to the buyer. The seller passes the loan to the buyer. Then, the buyer is required to make regular monthly payments to the lender whom the dealer is connected with to repay the loan. This method of financing vehicles has its advantages and disadvantages, therefore it is crucial to know all the options before signing off on any indirect vehicle loan. How can you get indirect auto finance? Direct auto financing is accessible through from lenders in their network of partners. Instead of looking for a loan and getting preapproved before visiting the dealer, you will obtain the financing after you purchase the car. The seller will receive the commission or some other form of payment in exchange for connecting you to the lender. This can be in an amount of percentage that's added to the interest rate. When you make the final payment then the lender will let the lien or title on the vehicle to you. During the loan duration, you'll also be charged an interest rate on your loan, just as you would for a . Others direct loans Indirect loans may also refer in the way of using brokers or marketplaces. Through these choices, you input your personal details and are matched with several lenders. Most of the time, your credit score will not be affected since these online marketplaces only require a soft inquiry. In addition, you'll be able to see potential loan deals that include estimated monthly payment, repayment period and interest rate in order to make an informed choice. Before you decide on one, you'll also want to compare the cost of all loans. Pros and cons of indirect financing Though indirect financing may help you enjoy a a more seamless car-buying experience However, there are some disadvantages to take into consideration before making a decision. Advantages of indirect financing in certain situations, it makes the most sense . Buy and shop in one place. It's generally more convenient to buy at the dealership. You can shop and obtain financing the same day. Less legwork. Although it's still beneficial to do so do so, it's not required. If you'd like to, you are able to do so without contacting other lenders before choosing your 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 preapproval from an external lender, consider these drawbacks. The higher rates. The dealership usually includes a portion on top of the rates offered by lenders that match your requirements. This means that you'll most likely be able to get a direct lender. Not as much control. It isn't possible to select the lender your personal information is traded around with. If you already work with a credit or bank union, it can be beneficial to join it -- you may get a better price or better terms that otherwise. Unavailable for some purchase types. If you're trying to purchase through a direct lender , indirect financing will obviously not be an option. How do you get indirect auto financing The steps for obtaining the indirect financing for your vehicle are similar to the process for a conventional loan. Before you apply make sure you have any documents handy that the dealer has to submit to the lender's in their network. Here's a step-by-step breakdown of the process to follow: Visit the dealership. Shop around and choose your car. You can apply for an loan in the car dealership. Be approved and select the best deal. Sign your loan documents. You can take possession of your . Alternatives to auto financing indirect If you do not want to get the indirect car loan through a dealership, there are several other options for financing your future vehicle. Banks typically provide loans for cars, but it can be a more involved process. If you have good credit and a good credit score, a bank may be the way to go. However, if you don't have a poor credit score, this may not be the most viable option. Credit unions operate similarly to banks, but members of the credit union are the main priority, not investors. You'll likely have to join the credit union, and the requirements to join differ from one institution in the same way. However, joining a credit union that has auto loans will save you money, and also give you more flexibility. Online lender Utilizing an online lender is another possibility for financing a car without having to go through a dealer. The majority of online lenders are focused on providing low rates and fair loan conditions, instead of the hefty commissions you might encounter at a traditional dealer. The bottom line is that indirect auto financing is a great way to purchase your next ride. But, it's essential to ensure you before visiting the dealership as there could be a better deal elsewhere. There is a chance that the dealer is willing to match or beat an external loan offer to gain your business. Learn more


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Written by

This article was generated using automation technology and thoroughly checked for accuracy and editing by an editor from our editorial team.



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 take control of their finances with concise, well-studied information that dissects complex topics into manageable bites.






Auto loans editor


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

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






Nationally acknowledged expert in student financial aid




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