Dealer Financing

Meaning and Definition

Dealer financing, also known as dealership financing or car dealership financing, refers to the financing options provided by car dealerships to customers purchasing a vehicle. In dealer financing, the dealership acts as the lender or intermediary between the buyer and the financial institution providing the loan. Dealerships often have relationships with multiple lenders and can offer various financing options to suit the buyer's needs.

Why it is important to know

Understanding dealer financing is important when considering car finance options. Dealer financing provides convenience as it allows you to secure financing directly at the dealership where you are purchasing the car. Dealerships may offer competitive interest rates, promotional offers, or special financing programs. However, it is essential to compare dealer financing options with other lenders to ensure you are getting the best terms and rates for your car finance.

Example in car finance

Suppose you visit a car dealership to purchase a vehicle. The dealership offers you different financing options through their dealer financing program. They present you with various loan terms, interest rates, and repayment options based on your creditworthiness. You can choose to finance the car through the dealership's financing or explore other financing alternatives, such as bank loans or credit union financing. It is important to compare the terms, interest rates, and total cost of financing from different sources before making a decision.