Is It A Good Idea To Finance A Car Through The Dealership?

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Financing a car through the dealership can be a convenient option for many buyers, offering a one-stop shopping experience where you can both select your vehicle and secure financing in the same place. Dealerships often have relationships with multiple lenders, which can provide you with a range of financing options to choose from. Additionally, dealership financing promotions, such as low-interest rates or special deals, may sometimes be more attractive than what you could find independently.

When you are in the market for a new car, the options are plentiful. Whether you are eyeing the rugged Jeep Wranglers, the roomy SUVs, or perhaps custom ford broncos, the choices seem endless. While car dealerships may offer financing options, it’s important to remember that it’s not your only choice. In fact, you can secure a car loan well before you even think about stepping into their showroom. You have to ask yourself whether it’s a good idea to finance through the dealership or not.

Many dealerships throughout Toronto and the rest of Canada will provide you with incentives and rebates for buying through them on specific models. These are designed to help push one particular model over another so that they can clear their inventory. When you can take advantage of these, they can help to save a lot of money in interest over time. It’s not uncommon to see 0% APR for six months or even a year. However, you also need to look at what the APR will go up to after the incentive period is over.

Dealerships generally work with more than one lender. Their goal is to sell you a vehicle, so they will work diligently in order to find a lender that will work with you. However, they are also focused on the bottom line. If they cannot get you into the vehicle that they want you in, they aren’t going to try very hard if you have bad credit.

It’s important to know what bad credit scores look like. By knowing what your credit score is prior to getting to the dealership, you can know whether you are going to need a specialty lender or not. Some of the largest lenders aren’t going to work with credit scores below a certain number. This may make it impossible for you to finance through the dealership simply because they don’t work with those lenders.

Additionally, in order to make the sale, many dealerships will allow you to seek longer auto terms. It’s not uncommon for dealerships across Canada to sign loans for 72 or even 84 months. The dealerships will extend the loan instead of reducing the price so that the monthly payment is more comfortable. This is going to cause you to pay a lot more in interest. Plus, you are unlikely to keep a vehicle all the way to the end of the loan terms, creating a negative equity cycle that can be extremely dangerous.

While it can be advantageous to finance through a car dealership on some occasions, it’s important for you to do your own research. You can use a car loan calculator prior to going into the dealership to know whether you are getting a good deal or not. You can also choose to get pre-approved from a lender of your own choosing so that you don’t need to work with the finance department at the dealership.

Buying a car and financing it is easy. Deciding on your lender and working with the dealership is where it can be complicated. When you know the pitfalls to look out for, you will be safer every step of the way. 

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