Find a loan that runs as sweetly as your new car
It’s easy to get lost in all the choices you have when you’re searching for finance options for a new car loan. Knowing where to look, however, is the starting point that makes it much more likely you’ll end up with the right one. This overview outlines the main avenues you can pursue as you look for new or used auto financing.
Traditional dealerships
Getting your financing through a dealership is a common approach as it allows you to buy a car and arrange credit at the same time. The dealer sources the loan from a third party, which makes it an indirect form of lending.
Lenders will then purchase the contract from the dealership, and the lender will either keep the loan and service it themselves, or package it with other loans to sell to other lenders.
Banks, credit unions and finance companies
Alternatively, you could get your car loan directly from the lender. The lender could be a bank, credit union or finance company. You might choose a brick-and-mortar lender or go online with a lender like Drive®.
Either way, direct financing enables qualified shoppers to learn more about their loan options or get approved before visiting the dealership. With a pre-qualification from Drive, you can shop for a car already knowing the terms of your financing, which may help you stay on budget and negotiate firmly on price.
A word about “buy here, pay here” dealerships
Another option for car finance is a “buy here, pay here” dealership. This kind of dealership is different from a traditional dealer because it supplies the cash for the financing itself. Since the dealership is still trying to sell cars and finance them in-house, you may end up with a higher rate than with other lenders.
You should also keep in mind that sometimes these loans don’t get reported to the credit bureau, since reporting your payments to the bureau is not required and the dealership may be understaffed.
Finance options for a range of credit types
Your credit score will typically have a significant impact on the terms of almost any loan you apply for. Consumers with poor* credit reports can generally expect less favorable terms, such as APR, than those with better credit. If that’s your situation, you may find it pays to work with a company that has the expertise to match your needs.
Drive is a full-spectrum lender that can help you get pre-qualified for an auto loan with no impact to your credit score in about two minutes. Once you’re pre-qualified, you’ll gain access to our Budget Customizer, which will let you search dealer inventories for cars that fit your budget. Drive is here to help you find your way forward.
* ”Bad” or “poor” credit is generally considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by Drive® and Santander Consumer USA.
