There are numerous avenues customers can take when seeking an auto loan. There are banks, credit unions, and auto dealerships themselves that offer financing for auto loans. Naturally, there are benefits and drawbacks to each.
Directly financing your auto loan through a bank or credit union often saves time when purchasing a new or used vehicle as the customer is already pre-approved before arrival at the dealership. Sometimes the customer can even get pre-approval online, expediting the process of purchasing a vehicle further. There’s generally not an interest markup that can save the customer money as the loan is coming directly from a lender rather than going through a middle-man like at a dealership. However, there are still drawbacks to obtaining an auto loan through a bank. According to CreditKarma.com, “Banks may advertise low or competitive interest rates — but often only offer those to borrowers they define as having “excellent” credit.” Of course, credit unions may differ in this as they typically offer lower interest rates. “…the average credit union interest rate on a five-year new-car loan in the third quarter of 2018 was 3.37%, while the average rate for the same loan through a bank was 4.93%.” A difference of 1.56% may seem small but it’s significant when considered over a loan’s life.
There are, of course, benefits to auto loan financing directly through a dealer as well. CreditKarma.com says, “The big advantage of dealer-arranged financing is that it’s incredibly convenient.” The dealer does the work for the customer, and the customer doesn’t have to go to a bank or credit union to get an auto loan. Also, sometimes new cars have promotional financing, which can get you a lower interest rate. There are also buy here, pay here dealerships that allow customers with bad or no credit at all to still purchase a car. Some customers with bad credit might find themselves unable to get an auto loan from a bank or credit union or only get one with very high interest rates. For customers like that, a buy here, pay here dealership allows them to still purchase a vehicle despite their bad credit.
Another important aspect of buying a new vehicle is arranging insurance. Making it easier to compare insurance rates online and even using more advanced “Bind Online” technology, as QuotePro has offered for many years, can give the lender a competitive edge by making themselves a one-stop-shop. As our digital-first world evolves, consumers will expect to do all the steps, from selecting a vehicle to arranging financing to buying insurance completely online. Financial Institutions and auto dealerships that embrace this move will be the ones to prosper!
To learn more about QuotePro’s insurance, kiosk, mobile and online sales solutions for auto dealerships, visit our AutoQuoter website or contact us: