Car Loans vs Dealer Finance

If you visit a car dealership, you’ll quickly realise they’re in the business of not just cars, but finance, but is dealership finance a good idea?

If you don’t have the cash upfront to pay for a car, and a lease is off the cards, then your next options are either dealership finance, or securing a car loan. It’s all too easy to buy a car, and finance the car all in the same spot, but is it a good idea?

To define them, they are essentially the same thing - usually a secured loan tied to a vehicle. However, with a car loan you either go through a broker or direct to the lender, and dealer finance is essentially a ‘white label’ product offered by a finance company the dealership is dealing with.

Pros of dealer financing

1. Convenient

You can shop for a car, and usually the dealership is all too happy to sell you a loan and drive off the lot in the same day.

2. Manufacturer Rates

Manufacturer finance (e.g. Toyota Finance) occasionally offer very low rates, but be sure to check the comparison rate and other fees and conditions.

3. Negotiations

Everything at a dealership is negotiable. If you take out a loan through them, they might be more liable to offer a better price on the car, plus throw in a few extra goodies like window tinting, but this relies on your negotiation skills!

4. Options For Borrowers With Poor Credit Options

Dealers say, “Give me your tired, your poor, your huddled masses yearning to breathe free”. No wait, that’s from a poem. Dealerships are often obliging when it comes to car buyers with poor credit history, but again this convenience comes at a price.

Cons of dealer financing

1. Vehicle restrictions

Many dealers only extend competitive finance to new vehicles, while used vehicles may get a higher interest rate.

2. Watch the sales price

As a consequence of offering everything in one neat package, it can be all too easy to gloss over the final details. Watch what you’re paying for, including an uncompetitive sales price.

3. Less competitive rates

There’s no such thing as a free lunch, and dealers often get kickbacks from the financing company for facilitating the transaction, and the end result is potentially a steep interest rate.

Pros of car loans

1. Low rates

If you’ve got a good credit history, you are more likely to secure a sharp interest rate that is more manageable on repayments, and lowers the total amount of interest paid over the life of the loan.

2. Flexibility

Choosing your own lender usually allows for more flexibility to tailor your loan to you. Whether that’s opting for a balloon payment, loan terms from 3 to 7 years, extra repayments and more. Many lenders also offer car loan pre-approval, so you know what type of budget you’re shopping around with before you start the car buying journey.

3. Choice

The world is your oyster when it comes to car loan lenders. As opposed to a dealer, which usually only offers finance through one company, there are many companies in the wider market for you to choose from and secure a competitive rate.

Cons of car loans

1. Less convenience

Paving your own road when it comes to car finance requires slightly more work on your end, as the dealership doesn’t do it for you. The end result, however, could be worth it. Car loans also require approval time, so you might not be able to find a car, finance a car, and drive off the lot all on the same day.

2. Less negotiation

The rate your lender gives you is usually their best and final offer. Plus, there’s not going to be any haggling with the price of the car, using the loan as a bargaining chip as they are secured separately.

Which is the best option? can essentially eliminate both of the cons associated with dealership finance and car loans - the running around, and the negotiation parts. Our car loan brokers work with multiple lenders to secure the best rate for you, which eliminates you running around.

In addition, also helps people who have had credit issues in the past. If you can show that you have improved your situation, or have a reasonable explanation for your history, we can work with you to get you a competitive loan.

Speak with one of our support agents today to find out how you can secure a car loan through


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