Car Loans From Bank Versus Dealer
You've decided to buy a car. You just need a loan to pull it off. In this article, we take a look at car loans from a bank versus a dealer in relation to which will get you the best deal.
It is important to understand that car loans are considered a fairly low risk loan by lending institutions. Why? Well, the factors surrounding them create a relatively low risk of financial doom for the lender. The loan is usually five years, which is short. The amount of money on the line is usually relatively small, often equating to what someone would put down as a deposit on a home. Combined, there just isn't a lot at risk. You'll never see a bad car loan portfolio taking down a bunch of banks!
So, where should you get the car loan? Let's start with your local bank. Traditionally, the advantage of using a bank is they have a history with you. They know your habits and this makes them more likely to give you money. Well, this tradition has died. Now everything is done on a computer system and the fact you've banked with them for years means next to nothing. In truth, applying for a car loan at a bank is just about the worst thing you can do. The rates are horrifically bad in most situations and you can get a better deal pretty much anywhere. The only exception to this would be credit unions which can give bad, decent or excellent rates.
The car dealer tends to be the easiest place to get a loan. Why? Well, the dealer makes money by moving as much product as they can and then servicing it when it needs maintenance and so on. Some will make money on the loan, but most don't. Regardless, this makes the dealer highly motivated to get you into a loan. From a positive perspective, this means you can usually get some kind of financing. From a negative perspective, the terms usually are not all that great. What about the 0 percent loans? Yes, they exist. Unfortunately, you usually need to have impeccable credit to get them.
So, which should you pick – the bank or dealer? Of the two, the dealer is usually better although there are always exceptions. Before you go with either of these, however, you should really shop for loans online. Why? Competition! The sites providing loan quotes online shop the inquiry across multiple lenders. The lenders known this, which means you get the best deal they have to offer. This results in much lower interest rates in most cases, and that is the key to saving money on your car loan.