Finance at the Dealer or at the Bank?Mario Tama - Getty Images (Mario Tama - Getty Images)"Hearst Magazines and Yahoo may earn commission or revenue on some items through these links."Dreams of a brand-new or pre-owned car can come screeching to a halt when you have to figure out how you're going to pay for that object of desire. Cash isn't always an option for everyone, and at that point, you have to consider financing. But is it better to borrow through the dealer or get a loan from a bank?Since everyone's situation is different, the answer depends on what's available to you. Before you decide, do a little legwork. Cross-shopping loans isn't as fun as cross-shopping new vehicles, but it's a very important step in getting yourself a deal you can afford and live with. Here are our tips to de-stress the process as much as possible.AdvertisementAdvertisement➡️ Skip the lot. Let Car and Driver help you find your next car.Shop New Cars | Shop Used CarsStart by Getting Loan Estimates from BanksLike mortgages, car loans are best negotiated before you've even found the item (in this case, a moving vehicle) that you want to buy. The first advantage of getting pre-approved is that you'll have a good idea of how much you can actually spend. That will include any money you have saved for a down payment (which may or may not include money for a trade-in), plus the amount you can borrow through a lender.Mario Tama - Getty Images (Mario Tama - Getty Images)Advantage number two is that you can go into the dealership with the knowledge that you can get a loan, for how much, and from whom. If the dealer can't beat the bank's terms, you can still leave with a new vehicle. (More on the dealer part of the process below.)AdvertisementAdvertisementAt this stage, you can go to physical banks or shop for rates online. If you belong to or are eligible to become a member of a credit union, it's a good idea to check there, as those institutions tend to offer favorable interest rates on car loans.There are even websites that will consider your credit score and bring you offers from multiple banks. (And likely many emails, phone calls, and text messages, but that's the price of doing business.) Yes, finance stuff is boring, but it's much easier to do this from the comfort of your couch than while you're simultaneously trying to negotiate a price on a vehicle you may or may not be able to afford.UCG - Getty Images (UCG - Getty Images)Find a Car That Fits Your BudgetArmed with this preliminary information, you can now set your sights more accurately on your automotive prey. When hunting for the right car, you'll have some guardrails on how much you can spend, which may mean the difference between getting or passing on an options package you've been considering.If you thought you could afford something around $50,000, but $40,000 is closer to reality, it's good to know that early in the car-shopping process. Otherwise, you may get too attached to a car that exceeds your budget.AdvertisementAdvertisementHaving a budget in mind also sets you up nicely for the inevitable question from a dealer salesperson: "How much are you looking to spend?" Chances are that they'll want to know how much you're looking to spend on a monthly basis, but in the end, the most important number is the total, out-the-door price of the vehicle. Anything else is just misdirection.Ask for a Loan Estimate From the DealerThe dealer is going to want to get you to finance through them (financing is a big dealer profit center alongside add-ons like extended warranties). Fortunately, it doesn't hurt to see what they can do for you. To save some time, you can present the sales manager with the best loan offers you've received elsewhere and ask them to do better. If they can, great.A good dealer will also make you aware of any financing specials offered by the manufacturer on its vehicles. The zero-percent deal is less common these days, but automakers do cut interest rates from time to time as an incentive to sell slow-moving or prior-year inventory. We recommend going to the automaker's website to search for manufacturer-backed finance offers before you head into the showroom.Pay Attention to the Loan TermSalespeople often like to focus shoppers on the monthly payment, which, in layman's terms, is the amount you'll see deducted from your bank account every month. While this is certainly important in determining the exact vehicle you can afford, it's important to take into account the total outlay of the purchase. That includes your down payment minus any trade-in credit, plus the monthly payment times the number of months.MediaNews Group/Boston Herald via Getty Images - Getty Images (MediaNews Group/Boston Herald via Getty Images - Getty Images)According to recent data from Experian, the average car loan is 69 months long for new vehicles and 68 months for used purchases. Think about whether you still want to be paying for—let alone driving—this vehicle nearly six years from now. Extra-long car loans, some beyond seven years in length, are becoming more common, but that doesn't necessarily mean it's what you should do.AdvertisementAdvertisementDon't lose sight of the fact that the longer you're paying those monthly payments, the more you'll pay, even if the monthly spend is lower. While doubling the length of a loan roughly halves the monthly payment, it also more than doubles the interest over the course of the loan. Always do all of the math before agreeing to any kind of financing, because chances are the dealer isn't going to do it for you.➡️ Skip the lot. Let Car and Driver help you find your next car.Shop New Cars Shop Used CarsYou Might Also LikeGift Guide: Best Ride-On Electric Cars for KidsFuture Cars Worth Waiting For: 2025–2029
