When it comes to financing a car purchase, many people assume that they must work directly with the dealership. However, there is another option: car finance brokers.
Car finance brokers and dealerships operate differently and understanding these differences can help you make an informed decision about where to finance your car.
Car finance brokers act as intermediaries between the buyer and the lender. They have relationships with multiple lenders and can shop around to find the best interest rates and loan terms for their clients.
Brokers are not affiliated with any one particular lender or dealership and can offer a wider range of financing options. They can also provide expert advice on the best type of loan for your needs and budget.
On the other hand, dealerships typically have a finance department that works with a specific lender or lenders. They may offer financing incentives and promotions to entice buyers to finance with them, such as low interest rates or cashback offers. Dealerships can also offer convenience and speed, as buyers can complete their purchase and financing in one location.
So, what are the main differences between car finance brokers and dealerships?
Loan options: Car finance brokers typically offer a wider range of loan options than dealerships. As intermediaries, brokers work with multiple lenders and can offer loans from banks, credit unions, and other financial institutions. Dealerships, on the other hand, may have a limited selection of lenders they work with, and their loan options may be more limited as a result.
Interest rates and loan terms: Because car finance brokers can shop around for the best loan options, they can often secure lower interest rates and more favourable loan terms for their clients. Dealerships may offer special financing promotions, but their interest rates may be higher overall, for more info check out our article on The Truth Behind 0% Car Loans – Do 0% Car Loans Really Exist?
Expert advice: Car finance brokers can offer expert advice on the best loan options for a buyer’s individual needs and budget. They can help buyers understand the pros and cons of different types of loans, such as secured versus unsecured loans or fixed versus variable interest rates. Dealerships may offer some advice, but their primary goal is to sell cars and finance packages.
Transparency: Car finance brokers are required to be transparent about the fees and commissions they receive for their services. This means that buyers can be confident that their broker is working in their best interests and not pushing them toward a particular, vehicle, loan, or lender for their own financial gain. Dealerships, on the other hand, may not be as transparent about their financing fees and commissions.
Convenience: Dealerships offer the convenience of one-stop shopping for car buying and financing. Buyers can complete their purchase and financing in one location, which may save time and reduce the hassle of shopping around. Car finance brokers, on the other hand, require buyers to work with them separately from the dealership but can liaise with the dealership on your behalf regarding settlement and vehicle pickup.
Flexibility: Car finance brokers can be more flexible than dealerships when it comes to loan terms and payment schedules. Brokers can work with lenders to negotiate customised loan terms that meet a buyer’s specific needs. Dealerships may have less flexibility in this regard, as their loan terms are often predetermined by the limited lender panel they work with.
There are pros and cons to both car finance brokers and dealerships when it comes to financing a car purchase. Car finance brokers offer a wider range of loan options and can often secure lower interest rates and more favourable loan terms.
They can also offer expert advice on the best type of loan for a buyer’s individual needs and budget. Dealerships offer convenience and may have financing promotions that can be attractive to buyers, but their loan options may be more limited, and their interest rates may be higher.
Ultimately, the decision of where to finance your car will depend on your individual needs and priorities.
If you would like more information about our service or would like to chat about your individual car finance options, contact our friendly Finance Consultants today on 1800 538 287 for an obligation-free chat about your finance needs.