Which is better for a car loan: bank financing or dealer financing?

Have you ever asked yourself about whether the signs at various dealerships which are saying “Only 1.5% on selected models!” or “Lowest rates ever” are real? Well, there is no clear answer. This will depend on the honesty of the dealer. They know that buying a car is a very emotional experience. It’s more than a tin can on four wheels; it’s about your feelings when you finally get behind the steering wheel. These experiences can push people to make an impulsive purchase, and usually, they do not to worry over how they’ll finance their new vehicle. Thousands of people get hooked like this every year when they’re looking for a car loan.

Before you leave the dealership in your shiny new car, you’ll go through the buying process. One of the major stages will be financing the vehicle. You won’t have many options, but even so, you still do have a few. In the first instance, you can obtain financing ahead of time through your bank. Otherwise, you can organize a loan on the spot through the car dealership. So, which option is better?

Bank Financing


The bank holds some benefits over the dealer, including convenience. Many individuals have a long relationship with their banks, and it’s not easy to ignore their services. Nobody wants to be outside of their comfort zone. So that means that they’ve got more chances of getting the bank to work with them even if they have insufficient funds. This applies more in particular to local banks and credit unions.

The main advantage of the bank is that they do not mark up their interest rate. The most common reason here it’s because there’s no third party – the dealer. That’s why bank rates are likely to be better than through a dealership.


The bank has several huge disadvantages. For some individuals with bad credit, it’s quite impossible to get a car loan through the bank. Immigrants also fall in this unlucky category. Very often their interest rates are higher than from the dealers, and they’re not negotiable. Generally speaking, they’ll only have one offer to give you, so don’t hope for more than that.

Dealer Financing


The dealership definitely has some benefits, which sometimes include very low rates. I mean very low. Sometimes dealers offer 0% as part of the promotion. While that usually only applies to new cars, it’s rate that bank won’t match.

Many people wary of banks believe that they only want to extort more money out of them. If you are financing your car through the dealer, it could be much easier. You need to show up, finance the vehicle and drive away. It takes only one day. But it’s not as simple as it seems.


The interest rate from the dealership can be much higher than from the bank. Dealers take a certain percentage of each payment, and that’s how they make money from each deal. Another reason for high rates is that often among clients there are people with bad credit and banks don’t like them and refuse to provide a car loan. Late payment also will give you a headache. Usually, the dealer sends your business to banks around the country.  So, it’s likely that you’ll make a call to the bank on the side of the country. There is also no guarantee that they’ll cooperate with you, as your local bank might.

As we’ve seen, the best financial option depends on the situation. This is very similar to the best food to eat depending on what you’re in the mood (or not) for.

We suggest this approach for finding the best financial option:

The best way to find the optimal interest rate while having the lowest monthly car payment is to use an online application tool, such as found on CarLoans411. With this tool, you can be assured the lowest rate possible while having the convenience of getting approved from the comfort of your own home.

We work with dealerships and financial institutions across Canada, and have had relationships with them for over 10 years. Therefore, we can always get you the best rate possible, in the shortest amount of time, with very little effort on your end.  An online application to get approved for a car loan literally takes under 2 minutes, and you will always get the best option back in terms of your dollars spent.

Both Dealerships and Financial institutions have their pros and cons, but with our tool, we eliminate those cons, while taking advantages of all the pros from each side.

By | 2017-08-09T18:26:44+00:00 April 28th, 2017|The411, Tips|

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