If you’ve decided to finance your next car purchase with a loan, you can choose to go through a bank or your car dealership. Since both these options come with their own set of pros and cons, the ‘right choice’ depends entirely on your situation. Carefully assessing your needs and making an informed decision can help you save time and money. Read on to know more about both options and steps to help you pick the right one:

Banks and Credit Unions

Going the bank or credit union route for a car loan usually involves getting a preapproved loan before going into the dealership to finalize your choice of car. This lender issues a quote and letter of commitment to help save time while finalizing your contract at the dealerships.

The rate of interest offered by a bank or credit union doesn’t include any markups. But the final number is determined after the dealer runs a credit check and reviews your credit profile.

Your interest rate may vary depending on many factors like your age, the vehicles’ age & mileage, if it’s a used or new vehicle, your credit score, and more.


Financing your car loan via the dealership works similarly to the bank, but in this case, the dealer does all the work on your behalf.

Once you zero in on the vehicle of your dreams, your dealer fills out a credit application on your behalf and submits it to multiple lenders. This gives the advantage of getting multiple options to compare and choose from.

In some cases, the dealer might quote higher interest rates and take the difference as their handling fee.

Choosing the Best Option

To put it simply, the best option is the one that helps you save the most amount of money, but figuring that out isn’t as easy as it seems to be and can turn out to be a very time-consuming process.

One of the best ways to do so is by getting a preapproved loan from a bank or credit union and then heading to the dealership to ask for quotes. This will let you compare options and determine which suits your needs the best.

If you have bad credit, it will be easier to get a loan from a bank or credit union, even if they offer you higher interest than what you were looking for.