So, you’re in the market for a new car and you’re wondering if it’s better to shop for a car and secure financing all in one place at the dealership or get a car loan from a bank or credit union. Well, let me tell you, the answer may surprise you.
In This Post
- Advantages of Getting a Car Loan at Bank or Credit Union
- Convenience of Shopping at the Dealership
- What to Watch Out For
- Your Most Powerful Negotiation Tool
ADVANTAGES OF GETTING A CAR LOAN AT BANK OR CREDIT UNION
You see, banks and credit unions may offer you the ability to apply for pre-approval or outright approve you, which turns you into a cash buyer at dealerships.
This can make it easier to compare estimated loan offers and relieve some pressure at the dealership. Plus, you might end up getting a better interest rate than if you go through the dealership.
Now, I know what you’re thinking, “But wait, isn’t it more convenient to do everything at the dealership?”
Sure, it may be more convenient, but remember, a loan through a dealer can also end up being more expensive because of interest rate markups. And, let’s be real, who wants to pay more than they have to?
CONVENIENCE OF SHOPPING AT A DEALERSHIP
But, here’s the thing, sometimes a dealership can beat the interest rate that a bank or credit union offered you.
Finance managers are basically brokers who have relationships with several lenders.
Don’t be surprised if they can beat your bank’s rate to get your business.
Just remember, if you choose to see what the dealership can do for you, make sure they won’t run your credit through the ringer with their lending partners.
Car salespeople and their finance managers can be sneaky, so if something doesn’t feel right, listen to your gut and walk away.
WHAT TO WATCH OUT FOR
Also, if you decide to get financing through a dealership, be aware of the items they may try to add on, like GAP insurance or car warranties.
Most car warranties offered, outside of manufacturer warranties, aren’t worth the paper they are printed on, but finance managers will still try to sell them to you because they make a nice commission from them.
You may do better shopping for your own car warranty.
And don’t forget, most state laws give you a right to cancel your auto loan within 3-5 days.
So, make sure to review all of your documents before signing and don’t sign any waivers you don’t understand.
YOUR MOST POWERFUL NEGOTIATION TOOL
In the end, the most important thing is to not feel pressured into making a decision.
If you feel like something is off, just walk away. Remember, your strongest negotiating position is before any money exchanges hands.
And remember, you can always walk away.