October 3, 2023

While there are various ways of buying a car, dealership and bank financing are the common options. Although both options have similar payment methods, each mode also has its own disadvantages and benefits. Therefore, it is important for you to thoroughly compare the two options so that you can make an informed decision.

Bank Car Financing

Most people tend to look for loans from their banks when they consider buying a car without enough cash. When purchasing your vehicle, working with a bank can be a great deal as they can offer a larger amount. However, the banks have to ensure that the loan is secure with the vehicle you are about to buy.

Bank loans are usually repayable within several years through manageable installments. Your loan repayment period will depend on your financial health, your interest rate, and the amount of your loan.


  • You may not need a down payment for loan approval.
  • Banks usually have affordable interest rates and numerous loan options.
  • With a healthy credit and finance record, you can get better loan conditions.


  • It might not be possible to negotiate for interest rates, loan amounts, or even payment terms.
  • Depending on your loan option, you might end up paying higher interests.
  • Administrative and origination fees might cause an increase in the overall cost of your loan.
  • Bad credit and low income usually limits your loan amount while increasing the interest rate.

Dealership Car Financing

Most dealerships offer car financing options when you consider buying your car from them. You might have to choose between the in-house financing options available with your dealership.
Your dealership of choice may work with the other banks to offer a loan or may work through car manufacturing companies. Paying a dealership that granted the loan is similar to repaying a bank loan; you pay through manageable installations over a specified period. Additionally, dealership car financing also includes interest.


  • There are better financing conditions, especially with a considerable down payment.
  • Buyers can negotiate on the loan terms, asking price, and interest rate.
  • You might get a 0% financing option, especially when the dealers are giving special offers.
  • You might benefit from dealership car loans even with bad credit.


  • To make sales, dealers might employ high sale tactics.
  • For newer models, you might not get a car loan from dealerships.
  • Most dealerships pay their employees on commission.
  • Average dealerships have fewer financing options.

Which Is Better?

It can be challenging to choose from the various financing options, especially the two discussed above. At the same time, both of them have their benefits. Be sure to take time before making any decision. Be sure to check in with different dealerships and banks and to choose the one with better terms for you.

If you have a strong credit and financial record, you might be better positioned to have better terms, especially from a bank. On the other hand, you might decide to take advantage of the various perks not available with banks.