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Choosing Between A Private Car loan Or Dealership Finance

choosing between a car loan or dealership finance (1)

So you’ve decided that you are ready to get yourself a car and you have found the one that ticks all the boxes. The downside is that you haven’t figured out yet how exactly you will pay for it. Well the obvious option would be to pull out your credit card and pay for the car right there and then, but if you don’t have the full amount upfront, you have different options on how you can finance the car. Some of these financing options include either a car loan or a dealership finance. Choosing the right car financing option is as important as choosing the right car that meets your needs. In this article, we discuss these two financing options in detail, their pros and cons and the one that you could opt for.

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Car Loans and Dealership Finance

A car loan is where a buyer applies for a loan either from a bank, finance company or broker in order to purchase a car. The car you purchase acts as collateral AKA security for the loan. This means if you are unable to repay the loan, you can lose your car. Dealer finance refers to a loan option offered by car dealerships securing funds on your behalf. The dealer gets in touch with their preferred bank or financing company and they help you arrange for the loan via them. All the arrangements are handled by the car dealership and you end up doing the minimum.

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Advantages Of A Private Car Loan

Each of these financing options have pros and cons which will help you in deciding which one suits you best.

  • You can purchase new or used cars and eco friendly ones as well with a car loan. If you don’t want to limit yourself on the kind of car you would want to purchase, then this financing option is for you. Additionally, you also have the freedom to pick a bank or financing company of your choice and one that will help you meet your needs. When you have the option of choosing a lender for yourself, you have the flexibility of tailoring your loan according to where you stand financially and your needs.
  • For car loans, private lenders do offer differing interest rates hence giving you the option to choose the most competitive one that will be manageable for you and your financial situation when it comes to repaying. Also the fact that your car will be used as security gives you the advantage of the lower rates.
  • You can wholesale your car through a private lender and add aftermarket extras or upgrades to your car into your car finance.

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Advantages of A Dealership Finance

  • This loan option is very convenient and simple in the sense that most of the work is being done by the car dealership. The dealer takes care of the loan process including the paperwork and you can leave with the car on the same day if you would like. All you need to do is tell the dealer how much you can pay per month and he/she will handle the rest
  • With dealer financing, you have the chance of negotiating the sale price. This will all depend on your negotiating skills. There are aspects of the financing that you can negotiate with the dealer plus they will offer you better prices so that you can get your financing with them. Not to mention, they can throw in extra services such as window tinting and car servicing
  • If you have a poor credit score, this financing option will be ideal for you. Some dealers have a financing package for such people, so if had lost hope because of that then the good news is that you can still get a car.

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Disadvantages of A Private Car Loan

  • If you are applying for a car loan, it’s important to note that you will be handling most of the paperwork including the back and forth with the lenders and calling different banks.
  • Car loan applications can take a while depending on the lender. It can take from a few hours to several days.
  • Negotiating with car loan lenders may be a challenge as most of the time the offer they give you might be their best one.
  • Car lenders use your car as collateral so that if you don’t pay your car repayments they can reposess your car to repay the debt.

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Disadvantages of A Dealership Finance

  • This financing option only applies for new cars. New cars are usually more expensive than used cars hence costing you more. If the amount surpasses your budget, it’s best to look for an alternative financing option.
  • If you would like to be part of the negotiating process, then this option is not for you as you will have to leave it to the dealer to handle it.
  • Balloon payment applies. This is a lump sum paid to the dealer at the end of your car loan. The amount is usually larger than the payments made before hence costing you more than you anticipated. For this, it’s important to include your budget in mind.

At the end of the day, it’s all about personal preference but if we were to pick the best option we would go for taking a car loan if you intend on saving yourself a chunk of money or if you love having options. At Auto Credit Now, we will help you get the best lenders with the best rates so you won’t have to worry about that plus we will reduce your workload and the stress it comes with by helping you out with the paperwork. You can apply online it only takes 5 minutes to get started.

Consider: Collateral Car Loan