Overhaulin'

If I'm going to buy a car, does it matter whether I use the dealer financing or go through my bank?

I'm planning on just going with whomever gives me the lowest rate, but are there any other advantages of one over the other? It would be a new toyota, if that matters...

Public Comments

1. Yes, there are advantages. But if you do it right, y ou can get the best of all worlds Go to your bank and get preapproved for your loan. When you are shopping, let the dealer know you have preapproved financing. He will offer to meet or beat their rate. If he can beat the rate, let him. If he can't then you still have the best financing available because you have that preapproval in your pocket. Another reason to let the dealer finance the car, is that we make a comission on the finance contract. This matters to you. If a person comes to me with a check or cash to buy a car, and I know I am not making any reserve on the contract, that is choking off one area of profit. I am less inclined to discount the car, since I know I am losing the opportunity to make a little in the finance office. If I stand to make a comission for the dealer in the finance office, I will give a little more on the car itself. Also, customers using dealer financing are more apt to purchase warranty, Lojack, and other accessories. So once again, as a dealer, I want you to use my F&I office. You don't have to BUY those things, but by letting me finance the car, we at least have the opportunity. Again, if I know I am not getting that opportunity, less discounts on the car in order to make the deal a good one for hte store. You wil get my meet-or-beat rate either way. Good luck! EDIT - to address what Matt said. He is absolutely right that all dealer contracts are contingent on lender approval. But as I said, you are in no danger if you do it as I said. IF the dealer cannot get you approved at the rate they wrote, you STILL have the approval from your bank. If the dealer says "I have to raise the interest 2%" just bring in the check from your bank. You don't HAVE to re-sign at the different terms. However, if you are approved at lets say 7% through your bank, there is no reason why the dealer would not be able to get the same rate.
2. You got the right idea go with the lowest interest. Also don't waste your money on a extended warranty If you read the fine print you will see that it covers just about nothing. And if you yelled loud Enif they may pay for parts but never labor, and that's where all the money is.
3. Be careful when financing through the dealer. They may offer to beat the bank rate, but they may write into the fine print that the rate they give you is "upon credit approval." Often times (I know multiple people this has happened to), the bank will not approve you the rate the dealer quoted, and they will call you back and tell you that your rate went up and you need a larger down payment AFTER you've taken delivery of the car. I'm not saying your shouldn't finance through them, just tell them you will not buy anything until after you have final approval for the loan.