![]() ![]() What to consider The first step is to get preapproved by a bank or other lender. This tends to be the cheaper option because you avoid paying the additional markup to the dealer. You don’t have to work with the financial institution you bank with or are a member of, so it’s possible to shop around for different interest rates and loan terms. You can also go directly through a bank or credit union to finance your car or auto loan. You can ask if there were other offers and whether those had lower interest rates or better terms. Most dealers will generally reach out to roughly five lenders and then choose one loan to present to you. If a lender agrees to finance your loan, they’ll provide a quote to the dealer, which is known as a “buy rate.” Interest rates through a dealer are generally higher because the rate they offer you is their “buy rate” plus additional interest that compensates them for handling your financing. What to consider Once you’ve agreed to buy a car through that dealership, the salesperson will refer you to their finance and insurance department, where they’ll collect your information and forward it to one or more prospective auto loan lenders, which could include banks, credit unions, and nonbank auto finance companies. ![]() This is also called indirect auto financing because the dealer is between you and the lender. If you need an auto loan, a dealer may offer to arrange financing for you. The car shopping process often begins at the dealership. Different sources for auto loan financing Dealer-arranged financing
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