What’s the best place to get a car loan? The answer varies based on each borrower’s needs, preferences, and credit history. Before you sign a contract with the dealership and drive off the lot, take some time to understand the pros and cons of different lenders. Doing your research on lenders and scouting for deals can help with finding the best possible loan offer for you.
Dealer-Arranged Financing
With dealer-arranged financing, the dealer acts as an intermediary in the financing process and connects you with one of its lending partners. While this is a convenient option, you lose out on comparing lenders and rates. This could mean you pay a higher interest rate and pay a fee to the dealer as well.
Captive Finance Companies
Many big brand carmakers have their in-house financing divisions. These companies may finance new vehicles or manufacturer-backed certified pre-owned cars. If you know the make and model of the vehicle you want to buy, you can apply online for a loan from a captive finance company before heading out to the dealership. This can be an attractive proposition as they can often have many promotional incentives, such as loans with 0% APR.
Banks and Credit Unions
You can also apply to a bank or credit union for a car loan. It’s a good idea to compare the rates quoted by different banks and credit unions and apply for pre-approval, so you can negotiate for a better deal with the lender. Make sure to also consider online banks, since these financial organizations usually offer low rates. Keep in mind that traditional banks and credit unions will likely require you to have a good credit score. Online lenders may have less strict eligibility requirements.
Remember if you’re having difficulty qualifying for a car loan, consider getting a co-signer, saving up for a larger down payment, or taking some time to build your credit before your car purchase. Before signing on the dotted line, make sure to read the fine print, so you are getting the best deal.