Is it better to finance with dealer or bank?

It's often best to compare both, as dealers offer convenience and special promotions (like 0% APR) through their network of lenders, while banks can offer pre-approvals and potentially better rates if you have excellent credit or a strong existing relationship, but it's a trade-off between ease (dealer) and choice/control (bank). Get pre-approved from your bank before visiting the dealer, then see what the dealer can beat it with to ensure you get the best deal.

What are the disadvantages of dealer financing?

Cons of auto financing through a dealership

• Higher interest rates: Dealers often mark up rates to turn a profit. ...
• Longer loan terms: Dealerships may offer you long loan terms — sometimes up to 96 months — to keep your monthly payment low. ...
• Only valid for cars on the lot: Dealership financing won't cover other dealerships.

What is the smartest way to finance a vehicle?

“Oftentimes, the best rate is going to come from a credit union, bank, or third-party lender, rather than from dealer-based financing,” he says. “Know what the prevailing interest rates are for borrowers in your credit score range, and seek multiple offers before heading to the dealership.”

Why do dealerships want you to finance through them?

Dealerships want you to finance through them because it's a major profit center, earning them commissions (kickbacks) from lenders and allowing them to mark up the interest rate (dealer reserve) above the lender's "buy rate," generating extra income from the loan's life. This "indirect lending" makes more money than a cash sale, and they also get incentives, can offer special manufacturer rebates tied to financing, and streamline the process for customers with challenging credit by working with specialized lenders. 

What is a good APR for a 72 month car loan?

A good 72-month car loan interest rate depends on your credit, but generally, rates below 5-6% APR are excellent, while averages hover around 4.5% to 7%, with prime borrowers getting much lower offers (under 4%) and subprime borrowers facing much higher rates. Look for rates closer to the low end for new cars and good credit, understanding that longer terms often carry slightly higher rates than shorter ones. 

Is it Better to Finance Through a Dealer or Bank?

How much is a $35000 car loan payment for 72 months?

If you take out a $35,000 new auto loan for a 72-month term at 4.0% interest, then your monthly payment will be $547.58. Although your monthly payments won't change during the term of your loan, the amount applied to principal versus interest will vary based on the amortization schedule.

What is the 8% rule when buying a car?

The 20/3/8 rule is a guideline that suggests you put 20% down on a car and repay the loan over three years. Applying the rule correctly will also require your monthly payment and car expenses be 8% or less of your income.

What is a red flag in a dealership?

The “Red Flags Rule” requires your dealership to develop and implement a written Identity Theft Prevention Program (ITPP) to detect, prevent, and mitigate identity theft. Your dealership's highest governing authority must approve the initial ITPP, and take responsibility for it.

Do car dealers make more money if you finance?

Yes, car dealers often make significantly more money when you finance through them, not just from the car's sale but also from the financing itself, through dealer reserves (marking up interest rates), lender kickbacks (spiffs/fees), and selling add-ons like warranties, making it a huge profit center, sometimes even better than the vehicle price itself. This is why they may offer better discounts on financed cars or push back on cash buyers, as financing adds substantial backend profit. 

What should a $30,000 car payment be?

For a $30,000 car, your monthly payment could range from around $500 to over $700, depending heavily on your down payment, loan term (e.g., 60 vs. 48 months), and interest rate (APR), with longer terms and higher rates increasing payments, while a larger down payment (like 20%) lowers them significantly. For example, with a $3k down payment, 5.8% rate, and 60 months, it's about $520; with a good rate on a 4-year loan, it could be $733. 

How to not get screwed by a car dealership?

Make sure that the Total Cash Price on the written contract matches the price that you were told. If the prices are different, you may be the victim of fraud. If the dealership refuses to honor the representations made to you by the salesperson, refuse to sign the contract and walk away from the dealership.

What credit score is needed for a $30,000 car?

To qualify for a $30,000 car loan, most lenders prefer to see a credit score of at least 660 to 700. That being said, your credit score is only one part of the equation. Lenders will also consider: Your debt-to-income ratio (how much you owe compared to how much you earn)

What is the 20/4:7 rule?

This article posits that there is a 20/4/7 rule, which is that you should plan to put 20% down, have your payments go no longer than four years, and the payment should not be more than 7% of your gross monthly income, or 15% of take-home pay.

What is the red flag rule for auto dealers?

The Red Flags Rule (the Rule), enforced by the Federal Trade Commission (FTC), requires automobile dealers to develop and implement a written identity theft prevention program designed to identify, detect, and respond to warning signs—known as “red flags”—that indicate that a customer or potential customer could be ...

Why Dave Ramsey says not to finance a car?

“Cars, trucks, RVs, boats, and everything that has motors and wheels go down in value,” Ramsey wrote recently. “NEVER finance them, because they go down in value and you get stuck in them. Don't let debt trap you in something that's losing value every day. Save up, pay cash, and own it outright.”

What should you never reveal to the dealer when negotiating?

If you tell them that you won't be taking out a car loan, many will either refuse to negotiate on the car's price or, worse, raise the price to increase their profit. If they know you have a specific budget, they also know they won't be able to move you up to a more expensive, profitable model.

How much commission does a car salesman make on a $30,000 car?

It is just a way for the dealer to ensure he's making money by reducing the sales commission. If the invoice cost of a vehicle, for example, is $30,000, then the normal 5-percent profit would be $1,500 and the 25-percent sales commission on the sale would be $375.

What is Dave Ramsey's rule on cars?

Dave Ramsey's core car rules emphasize paying cash, buying reliable used cars, avoiding new cars unless wealthy, and keeping total vehicle value under half your annual income to stay out of debt and build wealth. His philosophy centers on avoiding car payments, which he sees as money lost on depreciating assets, encouraging saving for a solid, affordable used vehicle instead. 

What is the 20/3/8 rule for buying a car?

The 20/3/8 rule is a car-buying guideline from The Money Guy Show, suggesting you put 20% down, finance for no more than 3 years, and keep total monthly car expenses (payment + insurance + gas) to under 8% of your gross income to maintain financial health. This strategy helps you avoid overspending, depreciation, and getting "upside-down" on your loan, ensuring your vehicle supports your budget rather than burdens it.
 

How to avoid car salesman tricks?

To avoid car salesman tricks, focus on the total out-the-door price, not monthly payments; negotiate price before trade-in and financing; resist pressure to buy; beware of unnecessary add-ons like paint protection; and secure financing beforehand to maintain leverage and avoid dealer markups. Key tactics to watch for include bait-and-switch, low-balling trade-ins, creating false urgency, and the "four-square" method. 

What is the average interest rate on a car loan with an 800 credit score?

For an 800 credit score (Super Prime), expect average new car loan rates around 4.9% - 5.3% and used car rates near 7.1% - 7.4%, though rates vary by lender, loan term, and current economic conditions, with some top offers potentially even lower, especially for new cars. 

What should a $30,000 car payment be?

For a $30,000 car, your monthly payment could range from around $500 to over $700, depending heavily on your down payment, loan term (e.g., 60 vs. 48 months), and interest rate (APR), with longer terms and higher rates increasing payments, while a larger down payment (like 20%) lowers them significantly. For example, with a $3k down payment, 5.8% rate, and 60 months, it's about $520; with a good rate on a 4-year loan, it could be $733. 

What is the 6000 car rule?

The Section 179 tax deduction gives vehicles under 6,000 pounds that are used for business purposes a deduction cap of $12,400 and $30,500 for vehicles over 6,000 but under 14,000 pounds.

What credit score is needed for a $40,000 auto loan?

Anything above a 660 (prime) is usually good enough for reasonable interest rates. According to an Experian report, 70% of borrowers fell into this range. The report also found that the average score for financing a new car was 754, and for a used car, 691.