Bank Vs. Dealer Financing: Know The Pros And Cons Of Getting A Car Loan

Getting a vehicle can take a long time if you intend to save up until you can completely pay it off in cash. Fortunately, an auto loan via bank or dealer financing can help you finally drive your own ride.

Since not everyone can pay for a car using cold hard cash, financing your car through auto loan is an easy and convenient way to own a car. However, you first need to understand the intricacies of a car loan.

pros cons car loans

You have to know the pros and cons of each type of car loan you can get. This way, it’s easy to figure out which one works best for you in terms of convenience, repayment, and other factors.

Take advantage of the benefits of getting a car loan by reading the fine print of the following types of auto loan.

Through bank financing

When it comes to applying for an auto loan, the first thing that will come to your mind is visiting your nearest bank.

Since they’re your go-to place for all things finance, banks offer top-notch quality in terms of availability and convenience.

If you’re considering an auto loan through a banking institution, take note of the following:


  • Easy accessibility. There is a bank in every town and more than one in every city. This makes easier to shop around and look for the best deal.
  • Technological solutions like mobile apps, comparison portals, and one-stop online services make it easier for people to apply for banking products like vehicle loans.
  • The biggest advantage of getting a car loan through a bank is the ability to customize your repayment scheme. Depending on the terms of payment and the down payment, you create a loan scheme that offers you both flexible and affordable repayment terms.


  • Banks can be pretty stringent when it comes to screening applicants. Apart from asking for a mountain of documents, they also conduct a thorough investigation of your credit history and finances to know if you can be trusted with their money.
  • One of the biggest disadvantages of financing a car through banks is the number of fees you will need to pay. Although they offer competitive interest rates, your total payment will be jacked up by the convenience fees.

Through in-house/dealership financing

Nowadays, you’ll find car salesmen offering you a convenient way to finance your car: through in-house auto financing.

This type of car loan has attracted buyers over the years with a lot of freebies, low down payment, and other programs that make ownership much easier. But before you sign the contract with your preferred car dealer, you may want to take note of the pros and cons of financing a car through a dealership:


  • With dealers now offering their own loan products, it is much more convenient for buyers to get a car. Showrooms have become one-stop shops for car buying.
  • Although they also screen the financial capability of buyers, in-house financing is much more lenient when it comes to requirements and criteria; as long as you can pay, you can drive a car out of the dealership.
  • Want to own a unit but can’t fork out the usual 20-percent down payment? Then in-house financing is the perfect option for you. Since dealers offer more flexible repayment terms, you can drive the car of your dreams in no time.


  • Although dealership-offered loans are unparalleled in terms of flexibility, interest rates for in-house car financing are higher. The longer you pay, the higher the interest will be. This puts a lot of buyers at risk of repossession, especially if a buyer guns for a car that’s way above their pay grade.
  • Since dealerships are pretty aggressive in terms of pushing products to potential customers, you may end up buying either a model that’s higher than you can afford or get additional products and services you may not really need.

So is it better to finance your car through a dealer or a bank? You have to seriously weigh the pros and cons of both types of car loans in the market. This way, you can drive your car in peace and maintain a healthy financial status even if you’re paying your monthly amortization.

Other sources: