Auto Finance: Getting a Auto Loan at a Dealership
If you are thinking about buying new auto, whether it is brand new off the lot, or just new to you, there are certain things that you should keep in mind in order to make sure you get the auto and the auto financing that are right for you.
There was a time when if you wanted to buy a auto, you went to the bank first and found out how much money in a auto loan you would qualify for. Then, once your auto financing was already in place, you made your way to the auto dealership to find out which autos fit into your budget. This is still a great way to handle your auto purchase, but you may find it difficult to get approved by your bank or you may get a better auto loan at the dealership.
Dealers discovered long ago that when people get all excited about buying a new auto, they often become impatient, and want to drive of the lot with it a soon as they can. Some people are too busy to go to the bank for their auto financing or they can’t get pre-approved, so the dealer needs to be ready to provide auto loans for all types of credit types. However, what consumers need to remember is that the auto dealership looks at auto loans as a revenue source, and there may be some negotiation room on the interest rate provided.
Before you head to the dealership, you should always try and get pre-approved from a bank or credit union. That way, even if the dealer can provide you a better auto loan interest rate, you know that you got a good deal. Whether you can get pre-approved before heading to the dealership or not, reputable auto dealers do have access to hundreds of lending sources covering all types of different credit levels. When a dealer sets up your auto loan for you at the dealership this is often referred to as indirect financing, as the auto dealer is facilitating the loan for you with the lender. What you need to keep in mind is that the dealer receives a fee or is provided the ability by the lender to increase the interest rate provided to you, so they can generate revenue. As a buyer you should respect and understand that dealers do need to make money, but you should make sure you find out from the auto dealer how much they are making on the loan and that their revenue is fair.
If you can get pre-approved that is great, but if you can’t your local auto dealer can help you get into auto financing, just make sure you understand how much they are making for setting up that loan for you.