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Should You Find Your Own Financing or Get It at a Dealership?

There is much to be said for convenience. In fact, it can be successfully argued the American economy depends heavily upon it to maintain profitability. One need only look at the meteoric rise of Amazon to see the merits of that argument. 

Convenience is also the leading benefit when it comes to accepting dealership financing. You’re already there purchasing the car anyway, you might well do everything in the same place — right? 

Wait though. Is it also more affordable? This thought raises the question: Should you find your own financing or get it at a dealership? 

Financing Is a Dealership Profit Center

While it might look like the dealership is doing you a favor, the reality is they’re doing themselves a favor. In nearly every case, the dealership retails the interest rate it gets from a lender. 

In other words, it will acquire the financing at a lower cost and tack on a percentage to keep as profit for lining you up with the lender. This is especially true with “buy here, pay here” dealerships that typically price their cars higher too. 

With that said, dealership financing, when backed by special offers from manufacturers, can often be hard to beat. This is particularly true when they offer zero percent financing or special lease deals. Still, it helps to do your research to know what your credit score entitles you to receive

Advantages of Seeking Financing on Your Own

As we mentioned above, getting your own financing helps you avoid paying retail for your car loan. Going directly to the lender eliminates the “middle” charges dealers impose when they secure financing on your behalf. 

Another advantage: Acquiring financing before shopping for a car helps you stay within your price range. You’ll know exactly what the monthly payment will be on a given loan amount because you’ll already have your loan approved. All you’ll then need to do is run various prices through a car loan calculator to see what you can readily afford to purchase. 

This also improves your negotiating position because you’ll have a loan already approved. If the dealer wants a shot at making a slice off of financing your purchase, they’ll have to lower the price of the car — or lower their cut — to be competitive with the package you already have in hand.

You’ll get a better deal either way. 

Think Ahead to Come Out Ahead

Too many people wait until they have negotiated the price of a car at the dealership to begin thinking about financing. This outsized mistake is an almost guaranteed way to overpay. 

Even beyond the issues we mentioned above, seeking financing beforehand can help you determine whether or not this is the best time for you to even try to buy a car. There might problems with your credit of which you were unaware that, when resolved, would qualify you for a lower interest rate. 

Applying ahead of time will reveal any such instances before you’re entranced by that new car fragrance and likely to do anything to keep experiencing it. Having your loan pre-approved also leads salespeople to treat you more carefully, as it signals you know what you’re doing. 

And finally, having a pre-approved loan simplifies the negotiation process. You’ll know exactly where you’ll need to be and there’s nothing to discuss if the dealer can’t match it. 

Thus, the answer to the basic question here is yes, you should find your own financing — and seek to get it at a dealership as well. Operating in this fashion positions you to get the best possible deal.

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Should You Find Your Own Financing or Get It at a Dealership?