The Secrets of Auto Financing Through Dealerships, Financial Institutions, and Credit Unions
Buying a car can be exciting, but many people dread that last part of the deal when you’re sitting in the finance manager’s office and reviewing financing options. They are washing and filling your new car with gas, and you’re looking at rates, options, extended warranties and making decisions based on just wanting to get into your new car and off the lot.
This is not on accident. The best way to make sure you get the best financing for your needs is to review all of your options. Did you know that you can get pre-qualified for a loan at a financial institution before you set foot in a dealership?
There are pros and cons to financing at a dealer, and pros and cons to financing through a bank or credit union. Let’s take a look:
It is very convenient to visit the showroom, select a vehicle, and let the salesperson handle all of the financing for you. Why make several trips and engage a bank or credit union when the dealer has plenty of options right there on their computer? The dealership will typically have a list of financial institutions that are willing to lend to you based upon your credit score, monthly income, and debt-to-income ratio. These institutions will let the dealer know what terms they can offer you for financing.
For example, one financial institution may say it will charge you a 5% interest rate on a vehicle with a $1,000 down payment for 60 months. Another institution may offer you a 3% interest rate on a vehicle with a $2,000 down payment for 70 months. The dealer will take these offers and then come up with an offer on its own. For example, the dealer may take the 5% interest rate the first financial institution is offering you and then add a 1% interest rate written into the contract. However, if you have good credit and a dealer is advertising a low promo interest rate if you go through their manufacturer’s financial company, then it can be beneficial to finance through them.
The bottom line is to know what interest rate you can qualify for and don’t settle for less. It’s also important to understand the used cars with higher mileage will result in higher interest rates, even with good credit.
Financial Institution and Credit Union Financing
Outside of missing out on a low promo interest rate offer on a specific make or model, there’s really no downside to getting pre-approved at a bank or credit union before you ever set foot in a dealership.
If you’re not in a huge hurry to purchase, you can secure financing first, walk into a dealership prepared and avoid surprises. At Truliant, we are proud to offer Express Check, a service where you get a blank check that you can sign up to the amount of your pre-approved loan. This allows you to visit the dealer at your convenience, gives you the power to negotiate and then fill out the amount to be financed – plus, there’s no obligation to use the check!