Why do some car buyers apply for car finance through a dealer?
Some people apply for car finance through a dealer because it is more convenient to complete the purchase in the dealership but should you get a car loan from a dealer?
Some car dealers offer finance through their own preferred lenders or manufacturer-owned accredited lending institutions (such as Toyota Finance, MyFord Finance, or Nissan Financial, for example.) This means a car buyer can purchase the vehicle and arrange finance within the same transaction, instead of looking to a third party such as a bank, independent lender, or car loan broker.
Some types of dealer finance may come with restrictions or conditions. Some lender finance deals may require buyers to purchase a vehicle at the list price; be locked into buying scheduled servicing from a dealer network; you may have to accept a balloon payment as part of your finance package; you may only finance new vehicles or selected models; or financial product offers may be limited to people with excellent credit scores.
According to the Australian Consumer and Competition Commission (ACCC) report, as part of the Royal Commission into the banking and finance sector, “dealers will be willing to sell some goods and services with a lower mark-up (including new cars) if this means they can sell more high mark-up services (such as parts, insurance and finance).”
Why do most people apply for finance through a lender or broker?
Applying for car finance can give car buyers greater flexibility, more choice, and in some cases, a leg up in negotiation if they choose to get car loan pre-approval.
If a car buyer applies for finance through a car loan broker, the broker can look through dozens of different car loans to see which one is the most competitive and suitable for the buyer. It also gives people with average or below average credit an opportunity to gain approval for car finance.