Should I Get My Auto Loan Through an Auto Loan Dealer?

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

If you’re in the market for a new car, you may want to get a loan through an auto loan dealer. Odds are you’re concerned about getting the best deal possible on your car, and particularly on your loan. According to U.S. News, rising prices mean that approximately 85 percent of cars are now purchased with an auto loan. While there are many factors to consider when purchasing your vehicle, one of the major ones is whether you should get your loan through your dealership or your financial institution. There are pros and cons to both options — let’s take a look at your choices to ensure that you can make the decision which best suits your needs.

Get or Refinance Your Auto Loan

Benefits of Using an Auto Loan Dealer

Once you’ve chosen your new car, you may have the choice of getting your auto loan through your dealership. There are quite a few benefits to choosing this option — in fact, U.S. News reports that 70 percent of auto loans are made directly through dealerships.


Buying a car is already a hassle, and it gets even more complicated if you have to go to multiple locations to set up your auto loan. When you get your loan through your dealership, you don’t need to worry about coordinating with multiple institutions, traveling to your bank to sign paperwork, or faxing documents back and forth. Instead, you can take care of everything on the premises of the dealership, making for a more seamless transaction. Additionally, getting your loan this way increases the speed with which you can purchase your vehicle, as you can more quickly complete the loan paperwork and be on your way.

Good Deals on Promotions

If you have good credit, you may be able to take advantage of special offers put on by the dealership. While your bank will have no connection with the dealership and thus no incentive to provide you with better rates, the dealership will want to lock in the sale and may offer special promotions on particular vehicles.

Ability to Negotiate

If you are able to demonstrate excellent loan rates from other institutions, you will often be able to get the dealership down to a lower price on your auto loan. This requires you to come prepared with comparison rates, but it is a benefit that you can take advantage of if you are aware of it.

Increased Flexibility

While financial institutions tend to be a little more strict about the amount of time you have to repay your loan, a dealership may be more flexible. This can mean that you’ll have longer to repay the loan if necessary, reducing your monthly payments — although it is important to note that, with interest, this may cost you more in the long run.

Get or Refinance Your Auto Loan

Downsides of Using an Auto Loan Dealer

While there are many benefits to getting your auto loan through your dealership, there are some downsides as well.

Higher Interest Rates

Because dealerships are handling the loan for you, they will often add markups to the interest rate as compensation. This means that you can end up paying much more over time. If you choose to go with a loan through the dealership, it is important that you pay close attention to interest rates and make sure that you’re really getting a better long term deal.

Third Party Loans

If you aren’t working directly with the financial institution, you won’t know exactly how credible they are. Before getting a loan through your auto dealership, make sure you find out who the third party lender is and do any necessary research to ensure that you feel comfortable taking the loan.

Working Directly With the Bank Instead of a Loan Dealer

If you’re not sure whether or not a dealership loan is the right choice for you, it might be beneficial to look at the pros and cons of working directly with a financial institution to get your auto loan. Some pros of working directly with a financial institution include:

  • Reliability
  • Lower rates
  • Better customer service

However, there are also some downsides to eschewing the dealership in favor of the bank. Some negatives you may encounter include:

  • Less ability to negotiate
  • Less convenience
  • Fewer promotions or direct offers
  • More time spent finalizing your loan

Ultimately, whether or not you want to get your auto loan through your auto loan dealer is a very personal decision — it depends on the rates you can get elsewhere, your monthly budget, your relationship with the dealership, and how quickly you want your loan to come through. Regardless of what you choose, it is vitally important to research your options thoroughly. By doing so, you will be able to figure out what kind of rates you qualify for, and ca bring this information to whichever institution you choose to make sure you’re not overpaying for your loan. Buying a car can be a stressful but rewarding experience — and if you’re well informed, you’ll be sure to make the right financial decision.

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