You’ve picked your vehicle, and now you need to decide between direct vs. indirect financing. What are direct and indirect financing and what are their implications for your auto loan? Simply put, direct financing is done directly through a lender, while indirect financing is done through a third-party lender, such as a car dealership. View the ins and outs of both as well as some examples with the Audi Stratham finance team below!

Differences in Direct vs. Indirect Finance Options

See how direct vs. indirect finance differs:

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• Direct Financing- Direct financing is when you apply for your car loan directly through a lender, such as a bank or a financial company. Here, you’ll receive one personalized loan from the lender, which you can then use to explore different dealerships.
• Indirect Financing- Indirect finance occurs when you deal with loan packages through a third-party lender. Usually, after you’ve finished shopping for your vehicle, you’ll apply for financing at the dealership and get a variety of loan options.

Direct and Indirect Finance Examples

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Now that you have working definitions, let’s go over some examples of direct and indirect financing below to get a better understanding of these concepts.

Examples of Direct Financing

• You go to your personal bank and get approved for a loan. Then, you shop for your next vehicle in either local dealerships or private sellers.
• Some dealerships offer ‘buy-here, pay-here loan options, which is often the last resort for shoppers with bad credit. With this in-housing financing, the dealer is your lender and you will be making payments directly to the dealer.
• Depending on the brand of car you’re shopping for, you may be able to apply directly to their own in-house financing divisions- known as captive finance companies- if they have them. Some examples are Toyota Financial Services, GM Financial, and Ford Credit, and they usually offer loans for new and certified pre-owned vehicles of their make.

Examples of Indirect Financing

• You probably start your search for your next vehicle on a dealer’s website or in their location. When you’ve found the model you want, you work with their finance team to explore the options that their network of lenders can offer. The dealer is the middleman, and you are getting the loan from one of their partnered lenders.
• If you have zero or bad credit, you might go to a dealer that offers special financing. Similar to the example above, the dealer also acts as the middleman by connecting you with their network of lenders, who are willing to work with car shoppers in your situation. This way, you’re getting an indirect loan as well as a subprime one.

What are the Advantages and Disadvantages?

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While there are advantages to direct financing, there are downsides as well, and the same can also be said for indirect financing. Compare them for yourself below:

Direct Finance Option

• Advantages: Customization and flexibility are the main advantages of direct finance. You’ll be able to apply before or after you shop and apply for as many loans as you desire.
• Disadvantages: The downside to the direct finance process is that it can take more time and you’ll have to apply at multiple lenders to compare offers.

Indirect Finance Option

• Advantages: While indirect finance includes more parties, the involvement of a financial team also speeds up the process. What’s more, you’ll be able to get more offers at once and your dealer can run your credit multiple times to help you compare offers.
• Disadvantages: There can be a higher cost associated with the speed and convenience of indirect financing, but only shopping around will let you know for sure.

Truly, the best financing option is not a one-size-fits-all scenario, and the team at Audi Stratham can help work through your financial options to make a great decision.

Get More Information on Auto Loans at Audi Stratham

As you try to decide where’s the best place to get a car loan, let the Audi Stratham finance professionals help you! Connect with us today to discuss your auto loan options around Concord and Portsmouth!

Source: https://t-tees.com
Category: WHICH