Is it better to arrange a car loan through a dealer or find your own?

Buying a major and exciting financial decision. For most people, it involves considering including finding the right vehicle, negotiating the price, and arranging financing. 

But when it comes to financing, one of the key questions that often arises is whether it is best to arrange car finance through the dealership where the car is bought or to arrange financing independently. 

We look at a number of considerations and look at which option is best.

Convenience and simplicity: Dealership financing

One of the main advantages of arranging car finance through a dealership is convenience. When you opt for dealership financing, the entire process is streamlined — the dealership often has established relationships with multiple lenders and can offer you a range of financing options. Plus, the paperwork and documentation required are handled by the dealership, saving you time and effort.

Competitive rates: Independent arrangement

While dealership financing offers convenience, it may not always provide the most competitive rates.

Some respected and trusted websites help you to shop around and compare offers from banks and online lenders. You can potentially secure a loan with better terms, such as lower interest rates, longer repayment periods, or more payment options. Independent financing can also give you the freedom to negotiate the terms directly with the lender.

Transparency: Independent arrangement

You have greater control over the loan terms and conditions. With this transparency, you can understand the total cost of the loan, including interest, fees and any add-ons. 

Dealership financing may sometimes involve hidden costs or additional add-ons that can increase the overall cost of the loan. You can avoid surprises and ensure that you are getting the best deal by arranging your own finance.

Preapproval and budgeting: Independent arrangement

Another advantage of an independent arrangement is the option to get preapproved for a car loan.

By applying for preapproval, you can determine your borrowing capacity and set a realistic budget before stepping into a dealership. This empowers you to negotiate better prices and avoid falling into the trap of purchasing a car that’s beyond your means.

Preapproval also gives you the opportunity to compare rates and terms from different lenders, ensuring that you find the most suitable financing option.

Incentives and negotiating power: Dealership financing

Dealerships sometimes provide incentives and special financing offers to attract customers. These may include low or 0% interest rates, cashback offers, or extended warranties.

Such incentives can sometimes outweigh the advantages of independent financing — especially if you qualify for these exclusive deals. Plus by opting for dealership financing, you can leverage the negotiating power that comes with the combined purchase of a car and financing, potentially leading to a better overall deal.

So which is right for you?

Choosing the right car loan depends on various factors, including your preferences and financial circumstances. 

Dealership financing provides convenience and potential incentives, but it may not always offer the most competitive rates or full transparency. 

Independent arrangement allows you to explore different lenders, secure favorable loan terms, and have better control over your financing. Consider your financial goals, creditworthiness, and the time you’re willing to invest in finding the best car loan for your needs.