How Does Financing a Car Through a Dealership Work?
Americans use financing for more than four out of five new car sales. We have many financing options, but nearly 55% of buyers choose captive financing outlets that support sales at dealerships and car companies. Understanding how financing through dealerships works and the advantages of this loan arrangement can help you make the most informed decision for your next car purchase.
Financing Through a Dealership Basics
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Once you’ve found your dream car, you can meet with a loan representative in the dealer’s finance office. You’ll discuss the financing you need and negotiate terms like the amount you’ll pay, the length of the loan, and add-ons. Once you’re happy with the finance terms, you simply complete the paperwork. In some cases, such as when you deal with us, you can even complete your finance application online before you arrive to save time.
The dealer will send your paperwork to its approved lenders or in-house financing team and see if you qualify for financing. Their credit checks will determine the amount of interest you’ll pay on the loan. If you’re approved for financing, review the offers and decide what suits you best. After reviewing terms and interest rates, sign the paperwork on your preferred loan, and you’ve done the deal. You can take home the car and start making payments according to the finance agreement. While you’re paying off the loan, the dealership receives a small percentage of the interest.
It’s Convenient
Financing through a dealership lets you test drive vehicles, choose the one you like, and organize your own financing within a couple of hours. It’s an ideal choice for busy people who don’t want to spend time organizing their financing with a bank or credit union, then visiting a dealership to choose a vehicle. If you’re relying on public transport or other people to drive you around until you get a new set of wheels, getting financing through a dealership can also minimize the hassle.
Many dealers present you with a range of financing options you can compare rather than a single financing deal. It would take you much longer to learn about the range of loan options available to you if you were visiting each lender individually. Having a selection of finance options presented to you helps you find the right financing for your circumstances.
It’s a Simple Process
If the mere thought of terms like interest rates and loan clauses makes your head spin, you’ll love financing through a dealership. Dealership employees guide you through the financing process so you don’t have to stress. Simply tell them how much you have for a deposit and what you can afford to pay each month, and they’ll sort out all the details with the lender.
The dealer will also complete the paperwork, so you only have to sign it and structure the finance agreement to suit your needs. They’ll also answer any questions you have in easy-to-understand language so you can feel confident in your finance deal.
Approval Is Easy
Dealerships have a wide range of financial partners, including lenders happy to finance people with poor or compromised credit. The dealer wants to sell you a car, so they’ll do whatever they can to get you the finance you need to do a deal. If you have a checkered financial history, you may find it easier to secure financing through a dealership than a bank or credit union. If you’re struggling to get approved for a car loan or are nervous that a traditional lender may turn you down, organizing financing through a dealership can be a great solution.
You Can Get a Long-Term Loan
Dealerships often offer loans with longer terms than traditional lenders. Rather than paying your new Nissan off in 48 or 60 months, you might have 72 months instead. Choosing a long-term loan lowers your monthly payments so they can fit more easily into your budget. You’ll pay more interest in the long run, but freeing up your budget might be worth it.
You Could Get a Higher Limit
Banks and credit unions tend to be pretty strict with their limits, but dealerships tend to be a little more flexible. For example, while a bank might lend you 90% of your new car’s value, a dealership might lend you 115% of the value. The dealership’s willingness to lend more than the value of the vehicle you’re purchasing can be really helpful if you’re trading in a car with an upside-down loan. You can use the additional financing to repay the loan on your old trade-in.
You May Get a Great Deal
Dealerships can offer access to special deals and promotions from the auto manufacturers that they affiliate with. Low introductory interest rate promotions and cashback offers are some common deals. These deals aren’t always available to all buyers or on all car models, but if you’re looking for a new car, have good credit, and are flexible about your choice of vehicle, they can be great incentives to buy from a dealership. If you’ve bought from a dealership before, they may also reward your loyalty with a great finance deal.
It’s Easier To Negotiate
Dealerships want you to take their financing deals, as they’ll earn more on the sale in the long run than they would if you borrowed from a bank or paid for your purchase up front. This puts you in a position of power that you don’t have when you take out a bank loan. Don’t be afraid to use your negotiation skills and see if you can get a better price on your car or get the dealership to include extra-value offers, such as window tinting or complimentary servicing.
If you’ve got any questions about financing through a dealership, chat with our friendly team. Our experienced finance experts will happily answer any questions you have in person or over the phone. We’d love to help you finance the new Nissan you need.