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Trusting In House Car Financing: 4 Car Dealer Financing Benefits

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Learn about the 4 main benefits of in house car financing, and how to reduce any risks involved.


In house car financing refers to an auto loan directly from the dealership. Most buyers get their auto loans from the lending wing of an automaker (e.g. GMAC or Toyota Financial Services), from a bank or from a credit union. In house financing almost always results in higher interest rates than these other options. However, it is an appealing alternative for people who may have had credit problems, or who have no credit history. Before signing on for such a loan, there are several things you should be aware of.

What Is In House Financing?
In house financing exists as a tool for dealerships to sell more cars to more people. Dealerships that offer such services realize that there is a large contingent of potential buyers who are unable to purchase a car through any other means. These dealers are willing to make high interest loans to consumers because the risk is relatively low. If they customer pays off the loan, then the dealership has made a handsome profit in interest alone, if someone defaults on the loan, they can simply have the vehicle repossessed and sell it again. Some of the less ethical dealerships out there may try to convince customers to purchase cars that are beyond their means.

How to Protect Yourself
If you are considering taking out an in house loan, be certain that you can afford the payments, but negotiate a purchase price rather than a payment price. Another old trick is for them to meet your monthly payment criteria by extending the loan term so that they can collect even more interest from you.

Remember that there are a number of companies that specialize in providing auto loans to people who have credit trouble. While these companies have some potentially negative characteristics of their own, you may be able to get a better deal from them. As always, it is best to research all your options before making a decision this important.

The Advantages of In House Financing
Despite the potential for negative financial consequences, purchasing a vehicle with an in house loan can be a positive experience. For one, this type of financing can generally be trusted as long as you remain aware of what you are signing. And this type of purchase could allow you to obtain a suitable vehicle when reasonable alternatives do not exist. Despite the higher interest rates associated with these loans, this type of purchase can go a long way towards repairing your credit. Additionally, if you make your payments when they are due for a reasonable period of time, the dealership will often allow you to refinance and reduce your rate. If you believe that having your car financed directly by the dealership is the best choice you have, take the necessary steps to protect yourself. Do not sign anything unless you understand what it means, and do not agree to purchase a car that you cannot afford.

4 Benefits of Car Dealer Financing

  • An easier purchase process.The entire process to purchase your vehicle is significantly easier with a car dealership rather than through a banking institution or other professional lending institution. This is because car dealerships offer a number of incentives including flexible interest rates, increased services, and extended warranty offers. With the number of options available to you, in addition to the vehicle being readily available to drive off the same day as you purchase it, financing through a dealership can be a faster and more efficient process for you overall. This option works best if your primary concern is getting a new or used car quickly and without a great deal of hassle
  • Large loan volumes.Most automotive dealerships deal with large volumes of loan applications and have their own loan departments. For this reason, they are capable of offering financing at relatively low interest rates. On the other hand, banks and credit unions may opt to offer higher rates because the auto loans they offer may not be as high in demand. Overall, the large volume of loans at car dealerships allows them to offer lower rates for potential buyers
  • Options that Only a Dealership Can Offer.Working with a dealer, you may have access to rebates and credits only available to those who finance their purchase with the dealer. Often, particularly in a slower economy, dealers create incentives for buyers to finance their cars by offering very low credit rates and extended financing. Sometimes, dealers can offer 0 percent or 1 to 2 percent financing on new cars, where banks and credit unions are forced to charge many times that rate. Since the dealers own the vehicles and don’t have to borrow money in order to make a loan, they can offer lower interest rates. For the same reason, dealers can offer a six or even seven year loan to buyers of expensive new cars. This can lower the monthly payment into a range that is affordable for a buyer, where a four or five year loan may have payments that are too high
  • A better option for less than perfect credit. Not only is a car dealership better able to accommodate bad credit scores, but they also make it easier to re-finance when it is necessary to do so. While you may get a higher interest rate or a higher monthly payment now through a dealership as a result of a poor credit score, within six months to a year you can easily refinance your auto loan for a lower interest rate and even potentially a longer term if you so choose. Overall, used car dealerships tend to be much more accommodating and flexible when it comes to auto loan financing, even for people with bad credit

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