Prearranged auto loans can only benefit the consumer, or so says the Consumer Financial Protection Bureau, but why is this the case?
With auto loans, there are generally two options available to the average consumer. Either you apply for a loan through a bank or other lending institution, or do so through a dealership. These are respectively known as direct lending and indirect lending, and can either benefit or hinder a consumer depending on their specific situation.
As with all loan applications, preparation is key. There are an infinite number of resources out there that can provide all the information one might need when applying for a loan. And, given the increase in online borrowing, one can now view all the various offers in detail from the comfort of their own home.
As such, the Consumer Financial Protection Bureau is now actively advising prospective car buyers to seek financing through a bank or credit union first, before setting foot in a car dealership. This, really, is the ultimate kind of preparation. It means that the consumer is walking into a dealership with the lowest available offer from a bank already on the table. It is then up to the dealership to decide whether they wish to undercut it.
Dealerships will typically have a number of relationships both within the industry and with financial institutions such as banks. This means that in many cases, the dealership will be more than equipped to beat the offer that you, the consumer, has already secured. It is also in the dealership’s best interests to secure your signature, even if it means lowering their demands. This is because a dealership will also often make money from your purchase in the future, through service or parts.