Dealerships vs Financial Institutions: Which Car Financing Option Is Better?
posted on Monday, May 17, 2021 in Financial Tips
Purchasing a ride doesn’t happen overnight. For an average individual, it can take years of hard work before they can finally buy their dream vehicle. This can change by financing through a dealership or directly taking out a loan from a financial institution.
Be sure to weigh the pros and cons before deciding what car finance option works best for you. To help you decide, we’ve listed the key differences between taking out a loan from a dealership and a financial institution.
Financing Through Dealerships
This involves applying for a loan from a lender. However, the dealers will do it for you. They will send out your credit information to different financial institutions and provide you with a list of rates to choose from. This option entails additional fees to cover the costs of doing business with them.
Dealerships often provide promotional pricing like 0% annual percentage rate (APR) on specific car models. However, an excellent credit score is often required to qualify for one.
Financing Through a Credit Union or Bank
This car finance option doesn’t require a middle man, meaning you can take out a loan directly from a bank or a credit union. Once you get preapproved, the lender will provide a letter of commitment (LOC) which you can show to the dealer when you go car shopping. The LOC outlines the terms and conditions of the loan, including the quote from the lender.
There are no additional fees involved since the institution directly provides the loan. However, expect more stringent requirements like having a good credit history. If you don’t have an impressive score, don’t be disheartened as there are banks and credit unions offering programs designed for this type of situation.
Drive Your Dream Car in No Time!
At Community 1st Credit Union, we offer vehicle finance options for both new and used cars. We also offer a First-Time Auto Buyers Program to young adults with limited credit. Apart from car loans, we provide financing for other types of vehicle like trucks, motorcycles, boats, and travel trailers. Schedule an appointment at one of our branches, or apply online. For questions or concerns, reach out to us today!