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Generally speaking, is a bank or the dealership the best option for a car loan?


Almost any purchase – and a car loan is a purchase, just as a car is – is better when it’s made after a vigorous exercise in comparison shopping. Factoring out any interest rate reduction that the dealership might throw in as a sweetener to persuade you to buy your car there, it’s highly unlikely that whichever bank the dealership uses as a financing partner will offer the best loan terms.
Ahh, but what about that sweet rate reduction? If that’s the only incentive the dealership is offering and it’s that great a deal, then you may be wise to take it. But before you do, calculate the total interest cost under that loan using one of the many loan calculators available online (just Google “loan calculator”). Then do the same using the interest rate for the average car loan, which you can find on websites like The difference between the two is a rough approximation of the value of the discounted financing.
Tell the salesman that you’ve got your own financing in place and would like that amount, the difference between the two figures (or somewhat more because he’ll try to talk you down), taken off the price of the car or loaded on to the car in the form of options. If he doesn’t go for it, then start haggling, and if that doesn’t work, then walk out and keep looking. Oh, and you also have to make sure that you can get loan terms at least as good as the average that you used in your calculations.
-Conrad de Aenlle