Bank Loan vs. Dealership: Insider Tips for Smarter Car Buying.

By Lisa Bezek – Personal Lender | Estimated read time: 3 minutes

Which Is Best: Bank Loan or Dealership Financing?

When financing a car, the big question is which saves you more – your bank or the dealership? The answer depends on interest rates, loan terms and potential incentives. But there are other considerations, too, such as how much time you have to shop around and what your credit is like.

Best Financing for Saving Money = Bank
Typically, you’re going to find better rates at a bank, but that’s not always the case for every situation. Your best bet is to shop for rates and get pre-approved before shopping for a car.

Best Financing for Saving Time = Car Dealership
Getting a loan through a dealership may save you time overall, since you’re buying a car and taking out a loan all at once. However, getting a bank loan may save you time at the dealership, since you won’t have to negotiate financing or wait to see if you’re approved for the loan.

Best Financing for Good Credit = Bank
If you have good credit, your bank might offer you better rates and terms than you’d find at a car dealership – unless the dealership offers 0% APR on the vehicle you want.

Best Financing for Poor Credit = Car Dealership
If you have poor or no credit, the dealership might be able to offer you financing if a bank can’t. But if you have time to work on your credit, your bank might still be an option.  See five ways to move forward with bad credit.

5 Key Considerations When Financing a Car.

Several factors go into figuring out whether to get your car loan from a bank or dealership. Here’s what to consider – including the pros, cons and money-saving tips of both options:

1. Interest rates

   Bank loan: Often comes with a lower interest rate, especially if you have a strong credit score and an existing relationship with the bank.

   Dealership financing: May offer a promotional rate (even as low as 0% APR), but it’s usually limited to certain models or requires excellent credit. Standard rates can be higher than banks.

2. Loan terms

   Bank loan: Typically comes with flexible repayment terms and transparent conditions. And you can shop for the best rate for the term you want before visiting the dealership.

   Dealership financing: Terms can be less flexible and sometimes include fees or add-ons. Dealers might offer longer terms to lower your monthly payments, but keep in mind this increases the total interest you’ll pay over the life of the loan.

3. Pre-approval 

   Bank loan: Getting pre-approved gives you clear budget expectations and negotiating power at the dealership. This small extra step before car shopping can give you peace of mind and empower your decision-making by showing you your interest rate and monthly payment upfront.

   Dealership financing: Approval happens on-site. While buying and financing in the same place can be convenient, it could cost you more if you don’t compare rates and terms.