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How to save cash on car loans financed through a dealership

Wide shot of a car showroom with two people looking at a car in the background and two reviewing documents at a desk in the foreground
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When you apply for a car loan at a dealership, they will shop your application to lenders in their network to find a match. You can also arrange financing on your own through a bank, credit union or online lender. If you decide that dealer-assisted financing is more convenient or want to take advantage of an incentive they are offering, there are actions you can take to ensure you get the best deal on an auto loan.

4 ways to save when financing your car through a dealership 

Shopping for a new car can be stressful and securing an auto loan with competitive terms can be challenging if you are strapped for time. Fortunately, there are ways to save when financing your car through a dealership.

1. Up the down payment 

Auto loans with low interest rates generally go to car shoppers with good or excellent credit. However, that is not the only way to get a good deal. You can also offer a higher down payment to minimize the risk the lender will assume by financing the car for you. Plus, you will save on interest over the life of the loan since you will be financing a lower amount.  

2. Shop the out-the-door price 

Some car salespeople focus on the monthly payment instead of the purchase price when convincing eager shoppers to seal the deal. But here’s the problem: A low monthly payment likely means that you will get an extended loan term, and the lender will have several years to collect interest from you unless you pay the loan off early. So, you want to focus on the out-the-door price to avoid this.  

3. Be prepared to walk away 

Even if you fall in love with a car, you must be willing to walk away if the numbers don’t quite work for you. By sticking to your budget, you could also find that the dealer is open to returning to the drawing board to negotiate a better deal with you.  

4. Use lender quotes to negotiate 

If you were preapproved for an auto loan with a better rate through your bank, credit union or an online lender, the dealer might be willing to match it. And in some instances, they will offer you a slightly lower rate to earn your business.  

When to skip dealership financing 

Even if it is convenient, dealership financing isn’t always the best option. If you have bad credit or a high debt-to-income ratio, you’re more likely to get a lower interest rate with a credit union or bank than with dealer-arranged financing.  

Or maybe you are at the dealership, and they are unable to match an offer you got from your lender. In that case, it is also sensible to skip dealership financing to save money, even if the dealer is offering a lower monthly payment. Remember, you will pay more interest if they stretch the loan over an extended period.  

Another reason to look elsewhere for a loan is a pushy dealer. While it is vital that they make the sale and secure your financing to meet goals, they should also be willing to give you a little time to get a rate quote from your bank. If they are unwilling to grant you this request, that’s your sign to move on.  

Next steps 

A car purchase is a major investment, and you want to take all the proper steps to get the best deal on financing. It is possible to save money if you opt to secure a loan through the dealership.

Still, some circumstances would call for you to look elsewhere. Ideally, you want to get an auto loan with a low interest rate, minimal fees and a monthly payment that works for your budget, regardless of which route you take to get financing.  

Learn more

Written by
Allison Martin
Allison Martin's work began over 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and Credit.com.
Edited by
Auto loans editor