Buyers nowadays have plenty of avenues when financing a car purchase. You could get a loan directly from the dealership or find a loan from a finance broker. The hard part is figuring out which one is the right choice. Each option has advantages and disadvantages, but ultimately, it depends on your situation and what you want from your car finance.
If you're unsure which one to choose, this article details what you can expect when you take out a car loan from a dealership or a finance broker.
What is dealership finance?
Dealership finance, also known as dealer-arranged finance or dealer finance, is a car loan you can get directly from the dealership where you bought your vehicle.
A lot of buyers choose to go with dealership finance over car loans offered by lenders for convenience. With a dealer-arranged loan, you don’t have to go through a lender’s application process. Because your car purchase and loan are tied to the dealership, you don’t have to send duplicate documents or talk to a separate loan representative.
Pros and cons of dealership finance
Dealership finance may be beneficial to some but not others. It’s best to analyse your situation carefully to figure out if the pros outweigh the cons. Keep these in mind before taking out dealership finance:
Pros of taking out a dealership finance
- More convenient: Car dealerships can be a one-stop shop for all your car needs. No need to talk to a separate dealership and lender. The dealership will handle the car purchase and car finance process simultaneously, so you don’t have to worry about waiting too long.
- Option for those with low credit scores: A dealership finance could be an alternative for those with bad credit scores or poor credit histories.
Cons of taking out a dealership finance
- Higher interest rates: Car loans directly from dealerships usually have higher interest rates than loans from lenders. Even if a dealership's advertised rate is low, the comparison rate may be higher due to the high fees often associated with dealerships. This means dealership car loans could cost you more overall.
- Less flexibility and features: Loans from dealerships typically have stricter terms and fewer loan features. This could make the loan more difficult to manage, and you could end up spending over the life of the loan.
- Less negotiating power: Since your financing will be tied up with the dealer, it may put you in a not-so-advantageous position when it comes to negotiating for a better deal on your car and your loan.
What is a car finance broker and what do they do?
A car finance broker acts as an intermediary between a borrower and a lender. A finance broker is not affiliated with any lender but does have a network of loan providers to give borrowers a range of finance options.
Car loan brokers help borrowers find a good finance solution that meets their needs. During the application for settlement of the car loan, the broker will communicate with the lender on the borrower’s behalf and assist the borrower throughout the process.
Benefits of using a car finance broker
Working with a car finance broker could help you save time and money. Here are a few benefits you can expect when you use a car finance broker service:
Car finance brokers offer convenience
A good car finance broker will do all the hard work for you. You don’t need to waste time and energy going through all the car finance options available on the market. They’ll handle everything from loan application to settlement.
Car finance brokers typically offer a personalised service. This means they’ll look for a loan that meets your specific needs. Your car finance broker shops around and compares car loan options for you. Best of all, they’ll speak and negotiate with loan representatives on your behalf.
Car finance brokers have connections
If you’re looking for a loan yourself, it may be harder to get a good deal because of a lack of connections. It’s especially difficult for those who are new to car finance. But when you work with a car finance broker, you’ll have access to their network of lenders.
Established car finance brokers usually have an expansive panel of lenders. This means you can get competitive deals that they probably won’t get with car dealership finance. It's also easier for you to find a finance solution tailored to your needs.
Car finance brokers provide flexibility
When you take out a car loan with a finance broker, you have more vehicle options because you’re not limited to just one dealership. You have more freedom to choose the vehicle to purchase. You’ll also have more negotiating power when buying a new car because your financing isn’t tied to the same dealership.
Car finance brokers work for you
Car finance brokers look out for your best interest. Because brokers are regulated, they follow strict rules on how to conduct business.
Finding the right finance car finance broker
Of course, not all finance brokers are the same. For instance, some may have a limited panel of lenders for you to choose from or don’t provide as extensive or personalised services as others.
At Aussie Car Loans, we offer a fast, seamless, and stress-free experience. Our expert brokers will help you find a car loan with competitive rates and useful features so you can save more and manage your loan with ease. For more information about our services, you can get in touch by calling 1300 889 669 or get a quick quote online!
