Auto Loan: Bank Or Dealership

With funding organized by the seller, the seller collects information from you and passes it to one or more lenders. We call this loan “direct loan”. After that, you can receive an offer or conditional letter of responsibility at a car dealership.

How Does Dealer-Assisted Financing Work?

If the lender (s) decides to finance your loan, the dealer may allocate or assign an interest rate called "interest on purchase" to finance the loan. The interest rate that you discuss with your vendor may be higher than the purchase rate, as it may include an amount that compensates your vendor for financing transactions.

For example, a dealership sends your loan request to several lenders (banks, credit unions, etc.) with which they are associated. The credit union is responsible for a 5% acquisition. The seller will then notify you of an interest rate of 6%. An additional 1% goes to the seller to pay the time of the loan's collection.

You Will Need To Provide A Significant Amount Of Security.

When applying for a bank loan, you may need to provide collateral to ensure secure financing. A pledge can be real estate, equipment, inventory and anything that corresponds to the value of the loan you receive. The provision of collateral may be risky because if you cannot repay the loan, the bank may receive collateral. Without this guarantee, your business may be at risk. If this bothers you, we recommend that you apply for unsecured business credit through an alternative lender.