Going For Car Dealership Financing May Not Be Your Best Choice When Shopping For a New Ride
Going to a car dealer to buy and finance a car’s purchase may seem like a good idea at first. After all, getting two things done in one trip can save one time when it comes to car shopping. However, this convenience also comes with some drawbacks. Here are five reasons why buyers should avoid car dealership financing.
Since in this setup the dealer is the one directly negotiating the loans, they may only present a client with the ones they’ve pre-picked. These deals may not be the best ones for the buyer in the end and they may benefit more by researching for better deals themselves and see which ones they’re eligible for. After all, a dealer may also be looking to profit from the transaction.
Higher Monthly Payments
In a way, a car dealer can act as a middle man for the customer and a lending institution. Thus, the rates that they may be able to present to potential car buyers may be higher than what the latter can get when they seek for a loan themselves.
This commission is also referred to as the ‘finance reserve’ and may also cause an increase in one’s monthly car payments in the future. However, it’s also worth noting that a borrower’s credit score may also play a vital role in the interest rate they will end up getting.
Pressure to Decide
It’s also important to remember that a buyer and a dealer may have ‘competing interests’. The dealer will likely be wanting their client to spend more while the latter is looking to do the opposite. This said a car salesperson is likely to put some pressure on their client to make a decision on the spot to secure a deal fast.
Missing Banking Perks
Opening multiple types of accounts in one bank can lead to some rewarding perks for a client. What more, banking with a credit union can actually get a person lower interest rates than one would get at traditional banks. In the end, choosing to finance a car purchase this way could give one better savings than settling with a loan pre-selected by a car dealership.
Less Focus on the Car
Borrowing to buy a car at a dealership, means a buyer is making two purchases at the same time. Thus, rolling these two transactions in one place can lead a buyer to miss vital details. Choosing to settle a car loan before going to the lot will enable a buyer to focus more on choosing the model they want instead of worrying about peripheral concerns.
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