A lot of people don’t trust car salesmen. They think they are shady and that they’re trying to pull the wool over our eyes. With a small portion of them, this may be true, but it’s certainly not the majority. One of the issues we find with car salesmen is that they are unfamiliar to us, so many of us choose to go through a business with which we’ve become familiar to obtain financing for a vehicle. Many car buyers choose to go with their personal financial institution to get the money they need to buy a car.
While there are certainly advantages to bringing your own financing to the table, there are also several drawbacks. A bank will offer up every option they have to loyal customers to persuade them to obtain financing through them. While most people would obviously rather deal with their financial institution than some outsourced financing bank, they may not be aware that they’re probably not getting the best deal they possibly can. Sure, there is the convenience of making your payments to the same place at which they do most of their financial business, but doing things this way may be a bad idea.
You feel as though you’re pulling a fast one, because you think you’re cutting the salesperson’s commission, and thereby saving yourself some money. However, the price of your car sometimes has very little to do with how much the salesperson makes from the deal. If you’re not great at negotiating, they’re still going to get their money’s worth from you with add-ons toward the end of the deal. So while you think you’re getting a great deal from your bank, you actually might not be in the end, and the bank isn’t going to care.
With a brand new car, there are better ways to get a good deal than bringing your own financing to the table, and here’s why:
- Wheeling and Dealing – Part of the process of buying a car is striking a fair deal with the salesperson. If you walk into a dealership with a check in your hands from another financial institution, they’re less likely to want to deal with you. They’ll, of course, sell you a car and they’ll act as they normally would, but you’re going to have a hard time getting them to the price you want.
- Lower Rates – While the percentage of interest that your personal bank or credit union is offering may sound awesome, usually a dealership can do better. See, they’re putting your information out there to as many banks as they can in an effort to get the best deal. It behooves them to get you a good rate, because you’ll be happier, and happier people will accept some of the add-ons that they throw out toward the end of the deal. One of their banks is liable to come up with a better rate than what your financial institution has to offer.
- Limitations – Your bank may only issue a check for ten thousand dollars, but the car you want is fourteen. So what happens then? You’re still doing financing through the dealership for the rest of the money, or you’re coughing up one hefty down payment. You end up having two loans with two different companies and expanding upon the hassle that you thought you were eliminating.
- GAP Insurance – What if the price your bank has agreed upon with you doesn’t include enough room in the loan for GAP insurance or a warranty? If you get into an accident, and the car is totaled, you’ll be responsible for the difference between what the insurance company is willing to give you and what you owe. This isn’t a good thing; you want that coverage. However, if your bank doesn’t determine that there is enough room for it in the loan they’re offering, what are you willing to give up; the car you want or the coverage you MAY never need?
There are certain aspects of bringing your own financing to a car dealership that make you think it’s the best idea. You think that you’ll have better control, or more leverage, but that isn’t always the case. As you can see, there are a lot of pitfalls that are associated with this type of financing as well. The choice is yours, but know that your bank’s deal may not be the best one.