There are potential benefits to financing a car through a bank, but there are also benefits to borrowing through a dealership. Here are the details.

There are potential benefits to financing a car through a bank, but there are also advantages to borrowing through a dealership. Which is right for you depends on what loans you qualify for and which lender offers you the best terms. To decide whether a dealership or a bank offers the most affordable loan, look at these factors:

Understanding Interest Rates

You want to choose the financing option that charges the lowest interest and fees. The Wall Street Journal advised checking the annual percentage rate (APR) of each loan. The APR indicates the cost of the loan, so you can compare loans by looking at their respective APRs. For an accurate comparison, make sure both loans are for the same amount of time.

The Federal Trade Commission (FTC) explained that financing through a bank has the advantage of finding out ahead of time how expensive the loan will be. You can then take that information and compare it with other offers.

Getting Approved

As GOBankingRates noted, dealerships offer financing options to most applicants. If your credit score is a pain point, and you’re getting turned down for bank loans, a dealership may still offer you financing. Dealerships work with many lenders, and it’s likely you’ll qualify for at least one of their financing options.

Reviewing Incentives

The FTC explained that dealers sometimes offer financing incentives. These could include reduced rates or rebates and may apply to certain cars. There may be more incentives available at the end of the month or the end of the year when dealerships are trying to hit quotas, as Money noted. Because banks aren’t trying to sell cars, they don’t offer the same incentives to purchase. Incentives can be an advantage of financing a car through a dealership instead of a bank.

In the end, whether you should finance through a dealership or a bank comes down to the numbers. Go with the lender that offers you the cheapest loan, and remember to take into account interest, fees, and any discounts or incentives.

Sarah Brodsky

About the AuthorSarah Brodsky

Sarah Brodsky writes about economics, personal finance, religion, and culture. She covers credit counseling, debt, and personal finance for Investopedia and the CESI Financial blog and has contributed work on Judaism and culture to the Jewish Daily Forward's Sisterhood blog. Her writing has appeared in the Washington Free Beacon, the St. Louis Business Journal, Info Tech & Telecom News, the Springfield News-Leader,, School Reform News, and other publications. She earned a bachelor's degree in economics from the University of Chicago.