Is It Better To Finance Through A Bank Or Dealership?

As most Americans are very likely to experience the repercussions of inflation, straightforward purchases will decline. The demand will be high, but people will be more conservative with their money and look for other options. 

Is It Better To Finance Through A Bank Or Dealership

Although the car market has experienced a fair share of challenges recently, there are still many possibilities. Apart from leasing a vehicle, you could just go to your local bank or dealership and borrow money for your purposes. The real question, however, is what will benefit you the most. 

So, let’s find out what’s best and discuss financing through banks or dealerships.

Financing Through Banks

Many people go to the banks for loans anyway, so buying a car is no exception. You will have to go to the branch or credit union to apply, but you will likely get pre approval before you even set foot in the dealership. The lender will give you a quote and a letter of commitment that you take to the dealer, which saves time on finalizing the contract. 

Depending on the bank or union, you may have to provide information about your vehicle of choice for pre approval. Don’t worry if you didn’t pick one yet, but know there could be delays. 

The rate offered by the bank or union will be the true interest rate and won’t include markup. But remember that the rate quote isn’t the final offer. When you head to the dealer to make your purchase, the lender will run a comprehensive credit check on you and review the full report before approving your application and determining your loan rates. 

Lastly, there are differences between buying used and new cars when financing this way. Some banks and unions have limits on the vehicle’s age and mileage, and newer autos could lead to a better offer, meaning lower interest rates. 

Financing Through Dealerships

Financing through dealers is very similar to banks. The only difference is that everything is done for you, with little time spent on paperwork. 

After you choose the vehicle, the dealer will have you fill out a credit application, and they will submit it to multiple lenders. It allows us to compare rates and terms to choose the best option. 

As we mentioned, you are more likely to get a lower interest rate on a new car. In some cases, you can even get a special promotional offer, allowing rates to go as low as 0% APR. If you have a bad credit score or history, you could work with “pay here” dealerships, but expect the rate to be pretty high. 

Which Option Should I Choose?

The most objective thing to say is that both are equal in terms of pros and cons. There is no ideal choice to make, and, by and large, everything depends on your situation and what’s more convenient. 

In general, banks tend to spoil potential clients with choices. They will offer you various options, and the interest rates will never be insanely high. However, the only possible drawbacks come as no surprise. Credit scores are essential for banks, and they will decide on giving you the loan based on their credit history search. Plus, you will have to spend a lot of time there, filling out all the necessary forms and dealing with paperwork. 

Dealerships offer you the most lucrative thing: convenience. Unlike banks, you never have to wait for approval or show up multiple times in person. Everything is done for you and eliminates the need to waste your time needlessly. But you’ll get considerably high interest rates due to them doing all the heavy lifting for you. 


In general, financing through a bank or dealership is a choice entirely yours to make. The dealers diligently handle your paperwork, while banks provide you with various deals and offer more options in terms of interest rates. 

Both methods have their drawbacks, with credit score and loan approval being the biggest offenders. However, they rarely tend to be deal-breakers when compared to high interest rates. In any case, the client is always right, and we can only help you make an informed decision.


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