What's the Difference Between a Car Loan and Auto Financing?
The Express Lane Blog
You’re a first-time car buyer who is in the beginning stages of purchasing a vehicle, and you’re not sure where to start. If you plan on getting your car financed, you have the option of either getting a car loan or auto financing. While the option you choose may depend on your financial situation, the main difference between the two options is the financing source.
Car Loan = Bank
A car loan is usually provided by a bank or credit union. Car buyers who go this route typically have higher credit scores, allowing them to get preapproved for a loan before setting foot in the dealership. During this process, the lender will give you a quote along with a letter of commitment that you can take to the car dealer, which ultimately saves time when finalizing the purchase of a vehicle.
You can apply for preapproval online or at a local branch, depending on the financial institution. It’s important to keep in mind when applying for a car loan whether you plan to purchase a new or used car because some banks and credit unions have limits on the vehicle's age and mileage.
Auto Financing = Car Dealership
Getting auto financing through a dealership is similar in many ways to getting financed through a bank, except the dealer is working to secure a credit approval on your behalf. After choosing your vehicle, the dealer will have you fill out a credit application that they will submit to multiple finance companies, which can help you get the best financing rates and terms for your vehicle purchase.
In addition, there are dealerships that also offer financing options to car buyers with bad credit or no credit established who typically get denied by traditional lenders. Credit Acceptance is a finance company that works with dealers in all 50 states to enable dealers to provide credit-challenged car buyers with approval for financing, regardless of their credit history.
If you happen to be someone with bad credit or no credit who is currently in the market to purchase a vehicle, a dealer enrolled in our program can help you get approved for financing.
All you have to do is fill out the Start Your Credit Approval form on our website and we’ll connect you with three enrolled dealers in your local area to help you get started!