Financing a car is one of the most significant financial decisions you’ll make, and knowing how it all works will set you up for success.

Here are the options and requirements you’ll want to be aware of:

The difference between car financing and loans

Although car financing and loans sound similar, they have key distinctions.

Car financing is securing the funds for a car purchase, often through a dealership. The dealer works with various lenders to provide multiple financing options. A car loan, on the other hand, is a direct agreement between you and a financial institution. You borrow money to buy the car and repay the lender in fixed monthly installments.

Both options have advantages, and the right choice depends on your financial situation, credit score, and preference for convenience versus cost savings.

Direct vs. indirect lending: Choosing the best option

When it comes to auto financing, you can either secure funding through direct or indirect lending.

Direct lending between you and a bank or credit union may be best if you want the lowest interest rate and prefer to handle the financing yourself. If you prioritize convenience and want access to a broad range of finance companies, indirect lending at the dealership can help streamline the car-buying process.

Leasing vs. financing: Which is right for you?

One major decision when getting a car is whether to lease or finance it. Both options have their benefits, and your choice will likely come down to budget, driving habits, and long-term plans.

If you plan to drive your car for many years and want to avoid ongoing payments, financing is likely the better choice. Leasing may be the right fit if you prefer lower monthly payments and upgrading your vehicle every few years.

What to bring to the dealership

To ensure a smooth experience, come to the dealership with the necessary documents and payment information. You’ll need a driver’s license, proof of insurance, income, and residence, and an acceptable form of payment (check with the dealer).

If you're trading in a vehicle, you’ll also want to bring the title, current registration, and any payoff information should you still owe money on it.

Making the right choices

Understanding auto financing options — whether you’re choosing between financing or a loan, direct or indirect lending, or leasing or buying — ensures you make an informed decision.

If you’re considering financing, Credit Acceptance works with over 15,000 dealerships nationwide to help buyers secure auto financing regardless of credit history. You can start the pre-qualification process today and take the next step toward getting your next car.