Whether you’re looking at buying new or used, buying a car can be quite expensive for the majority of people. Ideally, you’d make the purchase in ‘cash’, with money you are already in possession of, but unfortunately, this is not a realistic proposition for a lot of buyers. Instead, some sort of car financing is necessary, where the money is essentially borrowed from a financial institution to be paid back at a later date. Obviously, if you are going down this track, it’s important to consider both options and find out which is the most cost-effective and convenient option given your specific situation. This article will take a look at some of the main differences between the two and why you may go one way or the other.
Financing Through a Dealership
Generally speaking, the main benefit of financing through a dealership is the speed at which it all gets done. It’s quick, it’s convenient and it allows you to drive the car right out of there without further discussion.
If you are borrowing through a bank or financial institution, you will need to have this all organised prior to heading to the dealership if you want to make it happen that day. Particularly when it comes to used cars, it’s not uncommon to see an interested party have to walk away from a deal because they have yet to procure financing, only for the car to be sold a day later to someone else. In fact, this is the main reason dealerships offer financing, as a service to customers that are in need of it then and there.
Financing Through a Bank
That said, there are clear benefits that come with going through a bank. Buying a car is not something you necessarily want to do impulsively and without thinking it through. So in some respects, it can be advantageous to organise financing before you visit the dealership. This way you have a good idea of your budget and you’re less likely to overstep it. Further, if you have a good relationship with the financial institution, you may be able to procure a slightly lower rate than you would under other circumstances.
It’s also worth mentioning that when you are working directly with the bank, you may have more leeway with late repayments, etc. given that you have an existing relationship with them.
Other Differences
When we speak about the differences between the two means of financing, we need to speak in generalisations, as every dealer and bank is different and is going to offer different rates depending on any number of factors.
However, a lot of the time this is going to be a situation where the dealership is going to a bank to provide the service to you. The dealership is essentially a reseller of the loan, and often this will mean there is a markup price on what you could get by going to a bank. After all, they need a cut of the interest repayments to make it worthwhile.
However, it isn’t always this clear-cut. There are situations where you’ll find significantly better rate when going through a car dealership. You can, for instance, get a great deal on financing for certain cars if the dealer is trying to move stock, often getting a better deal than what you’d get from a bank. It’s not uncommon to see dealerships offer special promotions, with 0% interest for the first year, for instance. This simply doesn’t happen when going through a bank.
Furthermore, some dealerships will essentially do the leg work for you, shopping around to find the best rate for you. This enables them to offer a number of deals from which you can choose from – Mitsubishi finance deal, for instance, is particularly flexible and can be negotiated.
Our advice would be to do your homework and research as much as possible. There are good reasons to choose to go through either a car dealership or a bank but to get the best Mitsubishi finance deals you have to search and know what you’re looking for. Make sure when you’re looking at different rate options that you are comparing apples to apples. Check that there are no hidden fees (dealerships may try to sneak this in), be sure about the duration of the loan and read the fine print and you give yourself the best chance of getting cost effective car financing.
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