In-House Financing vs Bank Loans


Unless you have cash readily available to purchase a new or used car, you will most likely need to finance. There are two main options for financing the new or used vehicle you want: in-house financing or a bank loan. If you decide to use your own bank when financing a car, you may be missing out on the inherent benefits of in-house financing that your bank can’t offer.

In-house financing and bank loans, when paid on time, can have positive effects on your credit score. They can make it easier for you to qualify for decreased interest rates on a mortgage, future auto financing, or gain acceptance into rental properties. Higher credit scores can make you eligible for exclusive credit cards, in-store financing, and better chances of landing a job. Let’s take a closer look at what in-house financing and bank loans are and how they differ. 



In-House Car Financing Meaning

You may be wondering, what is in-house financing for cars? Essentially, in-house financing is when you obtain financing from a dealership. When you are contemplating in-house financing vs bank car loans, there are many benefits when choosing to use in-house financing services. Aside from the quicker process of gaining financing for the vehicle you want, in-house financing offers a smoother process, more flexibility, easier qualification, and a way to build your credit. These are a few of the many ways that in-house financing can help make your car buying experience enjoyable.

If you have ever gone through a pre-approval process with a bank or credit union, you know it can take days before getting the answers. A dealership’s in-house financing offers a smoother process with quicker turnaround; in fact you might even drive your new car home on the same day. Other benefits associated with in-house financing include flexible interest rates and extended warranties.

A dealer often offers more flexibility due to the sheer volume of applications they receive and process. Your budget and the type of car you are looking for are more likely to be addressed when seeking in-house financing. Depending on your credit and the vehicle you choose, dealers can also throw in a few incentives to sweeten the deal.

Individuals with less than stellar credit scores are more likely to qualify for financing through a dealer’s in-house system, making it easier to get a loan. This doesn’t change the fact that your poor credit score may increase the interest and monthly payment requirements. If you have bad credit and end up with a higher interest rate than you wanted, there’s still good news. 

After a year or two of full payments made on time, you can opt to refinance your loan for a lower interest rate. In-house financing can often have a positive effect on your credit score. Your credit score can go up after just a few payments made on time. Building up your credit score has an array of long-term benefits that are sure to help you in the future.

Bank Loan Differences

When you use a bank or credit union to finance a vehicle, you get to go directly to the loan provider. By doing this, you can get preapproved before you visit a dealership. Once approved, your lender will provide you with a quote and letter of commitment for the dealer of your choice. This can save you valuable time during the contract process of the purchase.

Depending on which bank or credit union you choose, you can opt for preapproval in person at a local branch or online. When you know the exact details of a vehicle you are interested in, this can be a great way to speed up the approval process, but if you are still unsure of the car you will be purchasing, it can cause delays. You will need to keep in mind that a pre-approval doesn’t reflect the actual interest rate.

After you visit a dealer and decide on the vehicle you want, the lender will run a hard check on your credit prior to approving your application and setting your final interest rates. Before choosing to finance a car with a bank or credit union, you may want to ask if they have any limits for the age and mileage if you are looking at used cars. New vehicles, generally speaking, are more likely to qualify for a lower interest rate and are easier to obtain financing for. Bank loans can help to improve your overall credit score as well. 

Financial Preparation for Car Loan Applications

The purchase of a vehicle is an important decision, and preparing your finances for an additional monthly payment can help you determine the down payment and regular payment you can afford. There are ways of organizing your finances before investing in a new or used vehicle. One of the first ways you can prepare is to check your credit score. If your score is lower than you anticipated, this gives you a heads up to start working on improving your credit prior to applying for financing.

Though you may not have the cash to cover the total purchase price of the car you are interested in buying, saving up a sizable down payment can help lower your total loan amount. Down payments also help reduce how many years you will need to finance for. A larger down payment can lower the total interest you will pay out during the course of the loan. When you plan ahead and take the necessary steps to check your budget, improve your credit score, and save for a down payment, you can easily arrange credit.

Find Professional Finance Help at North Coast Auto Mall in Cleveland

When choosing between in-house financing or a bank loan, it can often boil down to personal preference. Some people choose to use a bank or credit union due to local branches and the personable relationship of doing business in the community. There isn’t anything wrong with these justifications for a bank or credit union, but you may not get the best financing available by going this route. With more flexibility, extra incentives, added warranties, in-house financing is an enticing option when looking to obtain the funds for purchasing a new or used vehicle.

North Coast Auto Mall of Cleveland 41.419119, -81.724152.