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The Pros and Cons of Dealer Finance and Car loans

Dealer finance
  • Applying for <div>finance through your dealer</div> is convenient if you’re already buying your car from them
  • You’ll have your dealer rep on hand to help with your application, who can prepare and submit it for approval
  • You can be approved for a much lower initial interest rate
  • There’s more scope for you to negotiate further inclusions to your vehicle package
Car loans
  • You have more power to compare a wider range of options and shop around to see which one suits your needs
  • Provided it fits within your lender’s criteria and your borrowing power, you’ll be able to buy any car, new or used, from a dealership or private seller
  • You won’t be required to add a balloon payment to your loan agreement
  • You’ll have more flexibility when it comes to choosing your loan term
  • You’re restricted to vehicles sold by your dealer, often exclusively new models
  • Low interest rates are typically part of an introductory offer and revert to a higher rate after six to 12 months (if they’re available to you at all)
  • The lower rates may also result in the purchase price of your car being inflated
  • Although balloon payments reduce your repayments, they also increase your overall interest and make it difficult to sell your car during your loan term
  • Car loans may take longer to approve than they would through a dealer
  • To commit to finding the best deal, you’ll probably have to set a fair amount of time aside to compare options
  • You can’t approach your lender to make any adjustments to the vehicle or include other add-ons
Dealer finance
Applying for
finance through your dealer
is convenient if you’re already buying your car from them
You’ll have your dealer rep on hand to help with your application, who can prepare and submit it for approval
You can be approved for a much lower initial interest rate
There’s more scope for you to negotiate further inclusions to your vehicle package
Car loans
You have more power to compare a wider range of options and shop around to see which one suits your needs
Provided it fits within your lender’s criteria and your borrowing power, you’ll be able to buy any car, new or used, from a dealership or private seller
You won’t be required to add a balloon payment to your loan agreement
You’ll have more flexibility when it comes to choosing your loan term
Dealer finance
You’re restricted to vehicles sold by your dealer, often exclusively new models
Low interest rates are typically part of an introductory offer and revert to a higher rate after six to 12 months (if they’re available to you at all)
The lower rates may also result in the purchase price of your car being inflated
Although balloon payments reduce your repayments, they also increase your overall interest and make it difficult to sell your car during your loan term
Car loans
Car loans may take longer to approve than they would through a dealer
To commit to finding the best deal, you’ll probably have to set a fair amount of time aside to compare options
You can’t approach your lender to make any adjustments to the vehicle or include other add-ons