After reviewing bad credit car loans a red and black 2023 Toyota Crown is shown parked near an entrance.

Working with a Dealership For Financing Instead of a Bank or Credit Union

There’s no denying that having a reliable method of transportation is essential for the average consumer. And when it comes to getting behind the wheel of one, many people look to obtain assistance with getting their vehicle financed. The question becomes, which option is the best? Some opt to pursue financing through a bank or credit union, while others decide to work with a dealership to help them get what they want. Today, we’ll be exploring these options in the hope of helping you make a well-informed decision regarding your next vehicle purchase. If your credit history or rating is less than favorable, bad credit car loans are probably something you’ve considered in the past. This information will be beneficial to you before you take that first test drive.

Financing Through a Bank

When it comes to getting a loan through any financial institution, many consumers immediately think of banks as their best option. This is more than understandable as we tend to associate banks with finance. When it comes to getting financing through a bank, there are a variety of pros and cons that are important to consider. One of the things you should keep in mind is that banks tend to look at numbers and not individuals. This means that they’re far more likely to do business with someone who has a favorable credit history and who’s had a long-standing reputation as a good customer. Not all banks are the same, so some might be willing to work with you through a flexible payment schedule, but this also might come with high interest rates, so it’s a good idea to keep this in mind.

Going through a bank does offer some advantages. The first of which is that you have an opportunity to secure financing before visiting the dealership. This is excellent because it gives you an idea of what your price range will be. If you were thinking twice about getting financing through the dealership and going through the bank first, this makes the process easier as it’s one less thing you have to be concerned about.

However, there are some notable disadvantages to going through a bank as well. While obtaining financing through a bank means you’ve eliminated one part of the buying process, there are a few others that might become more difficult. First of all, you might not have the best loan and interest rate as you’re dealing with one financial institution. Just like trying on new clothes, the one-size-fits-all approach doesn’t always work. Another drawback is that You’ll have to navigate the purchasing process yourself, and some dealerships have special incentives for financing through them. Having a specific amount to work with also means that upgrading your choice of vehicle to have certain features might be out of reach.

A gray 2023 Toyota Highlander is shown parked under sunlight.

Financing Through a Credit Union

A common misconception that some individuals have is that banks and credit unions are the same thing, only separated through different names for each other. However, this is not the case. The primary difference between these two entities is how their profits are amassed and shared. Bands are for-profit enterprises, meaning that an individual or group of people owns them and tend to be publicly traded on the open market. Credit unions, on the other hand, are non-profit institutions. This means that they are driven by membership, which allows them to provide lower interest rates on loans and higher rates on savings accounts.

There are certainly some advantages to securing auto financing through a credit union. One of the most notable advantages of a credit union is that because they’re member-driven organizations, their focus is often more centered on you than a credit score. There’s definitely a more people-driven business approach to them. If you get pre-approved for financing through a credit union, there’s a very good chance you’ll also have lower rates and interest fees than you would typically encounter at a bank.

Much like the process of getting financing from a bank, you’ll have the knowledge of how much your loan is and what your rates will be. However, the same disadvantage we spoke of earlier applies, as it’s one amount, and the process of shopping and selecting a vehicle is left entirely up to you. This also limits you in your selection as you have a fixed amount to work with. That said, if you opt for vehicle financing from a financial institution, we recommend a credit union, as the experience will be far more personal. You’re likely to have a much lower rate of interest than you would at a bank.

Financing Through the Dealership

The third financing option for a new vehicle is going through the dealership. While dealerships are more in the business of selling vehicles than being a financial institution, this can be used to your advantage when you’re looking for financing. Unlike typical institutions that give you one single rate and leave the selection process to your discretion, working with a dealership is much like a boxer with a winning one-two punch. A knowledgeable sales team can help you choose which vehicle isn’t just in your price range but will be right for your situation. Choose to go vehicle shopping close to the arrival of a new model year. You might find that some of the best vehicles from the previous year will be marked down, and salespeople are all too eager to sell them to help make room for the new arrivals that are imminent.

Unlike a financial institution that gives you one rate, a dealership usually works with several different lenders in the area. This gives you several options to choose from when you’re looking for the vehicle that you want. The goal of any vehicle dealership is to sell. This means that dealing with their finance department is a highly personal experience. Many times, they are more than willing to work with you, your budget, and your credit score to help formulate a plan that’s very beneficial and fair. Of course, one of the best things about working with a dealership is the chance to trade in your current vehicle as a form of equity to lower your monthly rate by using it as a down payment.

An orange 2023 Toyota Tacome TRD is shown parked on a dirt road.

The Right Way to Go

After careful consideration and looking closely at all three financing options for owning a new vehicle, we can say with absolute certainty that going through a dealership is often the right way to go. While choosing the path you take to obtain financing is one that you should always choose at your own discretion, we can’t help but feel that a dealership may be in your best interests. The vehicle buying experience thrives on many different options and not being limited by any noticeable constraints. And that’s precisely what a dealership offers in terms of financing. By providing multiple options from different lenders, you’re likely to get the right rate that agrees with your financial situation, and the chance to use your current vehicle in the form of equity gives you a leg up in the overall process. When you’re buying a car, flexibility is your friend.