Should I Finance Through A Dealer Or Get Financing On My Own?

Automotive Finance, Ride Time, Used Car Dealer, Used Cars

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Financing a Used Car

When you’re in the market for a used car, there are times when you need some help to get you into the car of your dreams. Sometimes loans are not easy to come by. If your credit score is not all that stellar or you don’t have any credit history at all, it might leave you with limited options. If you are wondering whether you are better off financing your used car from the dealership where you purchase it or getting an independent loan, it really depends on your financial situation.

Before you choose whether to borrow money from a banking institution or the dealership, you need to know how each option will affect your wallet and your credit score going forward.

Banking institution or credit union financing

If you already have a financial institution that you work with, then you might be able to get a loan through a credit union or bank. If you are going to go through a traditional lending institution, you will need to get a pre-approval letter before you hit the car dealership. The pre-approval letter will tell you how much money you can borrow and will help you calculate the maximum amount you can pay for a car.

Banking institutions are often much less forgiving when it comes to their lending decisions. If you don’t have an established account, then you will likely have to jump through many hoops to get the financing you want, and you may not be able to borrow as much since you will be considered a bigger risk. Also, most lenders aren’t willing to negotiate their rates. What they offer is the best that they will offer, which can sometimes leave you paying more over time. A bank will also not shop around to find different financing options. If you don’t fit into their profile, then they will not offer you a loan.

When a banking institution pulls your credit history for a pre-approval, it is seen as one inquiry, but they will only give you one answer. If you want to check around with multiple banks, then you only have 14 days that the inquiries won’t start to add up and be considered a single inquiry. After that, further credit checks will begin to negatively affect your credit score.

Dealer financing

One of the biggest advantages that you get from financing with a dealership is that you can compare offers, which can mean some pretty awesome deals. Dealerships like Ride Time work with a large number of financing companies, so they can look around and compare rates to find you the best one. And they may be able to help you get financing if your credit history isn’t so great. If you are going to go with the dealership financing option, then it is important to know who the lender is and their history in the finance market, so you know that they are well-established and have staying power.

When you finance through a dealership, they only have to pull your credit report once to see what loans you are eligible for. They can then do something the dealership industry calls “shotgunning,” which means that they can send your loan application out to their many lenders and it usually only takes a couple of minutes for dealerships to find you a loan. The entire process to get financing typically only takes a couple of hours, as opposed to a banking institution, which can take days or weeks. By the time you get your approval from a bank, your dream car might already be some other customer’s new set of wheels.

Going through the dealership is often easier and much less of a hassle. Other factors you will want to consider is the interest rate and if there are high origination fees or penalties if you can pay off the loan before its term. Dealerships take the financing loans that they are offered and they mark them up slightly, which means that there is room for negotiation. That is a huge advantage that Ride Time financing has over banking institutions; you can work with our network of lenders to try to decrease the interest rate so that it fits into your budget. You will also have more options for repayment periods, which can mean less money per month.

When it comes to financing a used car, sometimes borrowers have many options available, while for others the options are limited. If you don’t have a healthy credit history or if you have a nonexistent one, then a dealership might be your ticket to affording the used car of your dreams. Swing by Ride Time and talk to one of our financial experts to see what financing options may be available for you.


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