How In-House Financing Car Lots Work

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5 Reasons to Choose In-House Financing When Buying a Used Car

Used car sales continue to climb as Americans search for dependable vehicles at affordable prices. The Edmunds Q3 Used Vehicle Market Report in 2015 found a 2.5 percent year-over-year sales increase in the used car market, an indicator of the strength of the benefits used cars provide a variety of lifestyles. (1) In-House financing is just one reason why vehicle purchasers find some used car dealerships attractive, since it saves time, money and hassle.

Wondering if an In-House financing dealership is the best choice for you when purchasing a used car? Here are five benefits to consider.

Save Time

An In-House financing dealership is your one-stop shop for both securing a loan and driving the car off the lot. There's no extra trip to the bank required to work with a loan officer.

Peace of Mind

An In-House financing dealer specializes in securing financing for auto purchasers, so you're working with an expert in their field whose energy is not divided between home or other types of loans. You can also use a car comparison site such as Kelley Blue Book to ensure you get the best price for the car you're purchasing. (3)

Benefits for All Types of Credit

Whether your credit is impeccable, you have no credit history, or you have poor credit, In-House financing helps purchasers with any type of credit secure an optimal loan for their used car.

Competitive Interest Rates and Perks

Because an In-House financing dealer focuses on auto loans, the dealer can often offer lower interest rates and lower monthly payments than a traditional institution depending on your credit. Extended warranties and rebates are also common perks of borrowing from an In-House financing dealership.

Personal Relationship

When you're working with an In-House financing dealer, they'll get to know your financial history, your needs and your vehicle desires inside and out to secure the best affordable vehicle for you. In-House financing dealers want to help you realize your car dreams and have flexible options to get you there.

Does In-House financing help my credit?

In-House financing through the dealership makes the car-buying process easier and smoother, and getting an In-House financing loan can also help build your credit over time. It can often be difficult to get approved for an auto loan if you have bad credit or no credit, but In-House financing dealers are usually more accepting than traditional lenders like banks and credit unions. With an In-House financing loan, you can get approved no matter your credit situation and then work on building up your credit by making your payments on time.

To make sure your In-House financing loan activity affects your credit score, make sure to ask your dealership if they report to credit bureaus. Many dealerships with In-House financing do, but there are some that don't. If they say they report payments, this means that over time your credit score may improve as long as you are making timely payments.

Getting an In-House financing loan means you'll be able to keep driving as you work on building your credit. One thing to remember is that because most In-House financing dealerships cater towards those with no credit or bad credit, you may have a higher interest rate or have to put down a down payment. However, after a few months of make payments on time and having your dealership report it to a credit bureau, you may qualify for a refinancing of your In-House financing loan, which will mean a lower interest rate.

What is In-House Financing?

Dealerships who offer the opportunity to obtain a loan without ever leaving the dealership is the definition of “In-House financing." There are many In-House financing loan programs, from major dealerships like Toyota, to Buy Here Pay Here car lots.

Purpose of In-House Financing

Typically, the purpose of In-House financing is to allow people who would not qualify under traditional banks or through credit union financing to buy a car. Car dealers became In-House financing dealerships in order to be able to help more buyers get approved for a loan on the road.

How Does In-House Financing Work?

You can get approved online so check what supporting documents as every dealership requires different documentation for loan approval. The important note is that In-House financing dealerships are interested in finding the best financing terms for "riskier" buyers, despite their credit history.

Who Typically Uses In-House Financing

In-House financing appeals to those who want one-stop shopping or the discount the dealership offers to those who do not qualify under a traditional loan. Over the years, In-House financing has evolved to where some dealers actually offer a discount to those who use their In-House financing.

Should I Use In-House Financing?

Before you decide whether or not to use an In-House financing car dealership, shop around and compare interest rates, discounts and other deals. Compare not only the monthly payment, interest rates, loan lengths, but early payment penalties and any hidden fees. In-House Financing Car Dealership can offer great deals. The key is being an educated consumer so you can determine what works best for you, traditional financing or In-House financing.

Payment options with In-House financing

In-House financing means a borrower signs an auto loan directly from the dealership. Most of the time, In-House financing dealerships have higher interest rates than regular lenders like banks and credit unions, but In-House financing can be a good choice for those with bad credit or no credit, since In-House financing companies will approve them. It is also convenient because you don't have to shop around for financing later.

In-House financing terms are similar to terms from other lenders. In a conversation with the In-House financing dealer, you'll be negotiating the loan terms, including the loan length, a down payment amount, and the interest rate on the In-House financing loan. Putting up a large down payment may help you negotiate for a lower rate or a longer loan length, since this decreases the risk the In-House financing company has to take.

There are also other benefits to choosing In-House financing over other types. For example, the purchase process will be easier since In-House financing dealerships can offer incentives that banks and credit unions can't, like flexible interest rates, extended warranties, and increased services. There are also many options for In-House financing loans that only dealerships can offer. Since In-House financing companies own the cars, they don't have to borrow money in order to make the loan. In-House financing dealerships also move faster and are more convenient than other lenders. You can drive the car off the dealership the same day, and you can often pay online every month to the dealership you bought from.

All information provided on this site is for informational purposes only and may have come from other sources. DriveTime makes no representations as to its’ accuracy or validity, and it is provided on an as-is basis.
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