How to assess different car dealer finance options

Car dealer financing is one of the best options to finance a car. These loans are offered by car dealers to qualified customers in order to increase their sales. However, car dealers sometimes place hidden charges on these loans to earn additional profits. In order to avoid getting inflated loan rates, buyers should learn how to assess the best car dealer finance options using the steps below.

Step 1: Check the financing rates offered available lenders

Since car dealers are not lenders, assessment of the financing options they offer should start by checking the rates offered by lenders that are connected to dealerships. Check the loan rates offered by banks and other credit unions. Knowing the actual interest rates offered by these lenders helps car buyers to determine whether the loan rates from dealers are inflated or not.

Step 2:  Be aware of “dealer reserves”

Buyers should be aware of the existence of “dealer reserves”. Dealers are allowed by their financing providers to increase the interest rates they place on the loans that car buyers obtain through them.
For example, a car buyer obtains a loan from a car dealer. The car dealer would then secure a loan for the buyer from the lender with an interest rate of 3%. The car dealer could increase the interest rate to 5% and earn profit from the additional 2% interest placed on the loan.

By knowing the actual rates offered by banks and other credit unions, car buyers could compare these rates and those that are provided by dealers. Through this, buyers could determine if dealers are placing the “dealer reserves” on the loans they provide. Asking about the existence of “dealer reserve” provides car buyers the power to negotiate with dealers regarding the loan rates.

Step 3: Choose the best rate

After assessing the car dealer financing options available, car buyers are able to select the best rates offered and proceed with the necessary steps needed to push the loans through. They can submit all of the necessary requirements and have their loans approved.

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