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Indirect auto financing: What exactly is it and is it a good idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and original content, by enabling users to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies that compensate us. This compensation can affect the way and where products appear on this site, including, for example, the order in which they may appear in the listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other home lending products. This compensation, however, does not influence the content we publish or the reviews that you see on this site. We do not cover the universe of companies or financial offers that may be open to you.



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3 min read Published 21st October 2022
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At Bankrate, we ensure the accuracy of our content seriously. "Expert verified" means we have the Bankrate Financial Review Board thoroughly evaluated the article for clarity and accuracy. Its Review Board comprises a panel of experts in the field of finance, whose mission is to ensure that our content is objective and balanced. Their reviews ensure that we are publishing top-quality, reliable content.




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The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances by providing precise, well-researched and well-written facts that break down otherwise complex topics into manageable bites.







Reviewed by Mark Kantrowtiz Reviewed by Nationally known student expert on financial aid

Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as 529 plans, scholarships, education tax benefits and student loans.









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Indirect auto is when an lender offers financing to the seller of the vehicle rather than directly to the purchaser. The seller then transfers the loan to the buyer, and the buyer pays each month regular payments to the lender whom the dealer is connected with to repay the loan. This type of financing for vehicles comes with benefits and drawbacks therefore it is crucial to understand all your options before signing off on any indirect vehicle loan. Indirect auto financing: What exactly is it? Indirect auto financing is available through from lenders in their partner network. Instead of seeking a loan and then getting preapproved prior to visiting the dealer to get the financing once you buy the car. The seller is paid a commission or other type of payment for connecting you to the lender. It could be in the form of a percentage added to your interest rate. When you make the final payment then the lender will let the lien or title on the vehicle to you. During the loan duration, you'll also pay interest on the loan like you would with the loan . Other direct loans Indirect loans could also be a reference to the process of using a marketplace or broker. With these options, you enter your personal information and you are then matched with several lenders. Most times, your credit score won't be impacted since these marketplaces need the submission of a soft inquiry. Additionally, you'll be able to see potential loan offers that contain the estimated monthly payment, repayment period and interest rate in order to make an informed decision. Before you select one you should also evaluate the cost of all loans. The pros and cons of indirect financing While indirect financing can help you have an easier time buying a car However, there are some disadvantages to consider before moving forward. Benefits of indirect financing In certain instances, it is the most sense . Shop and purchase all in one location. It's usually more convenient to purchase from the dealership. You'll be able to browse and get financing on the same day. Less legwork. While it's a good idea to , it is not strictly required. If you'd like to go without having to apply with different lenders before deciding on your next car. Bad credit options available. Specialty dealers offer options for customers with less than perfect credit. Pros and cons of indirect financing Prior to you go to the dealership without the approval of an external lender, consider these drawbacks. Higher rates. The dealership usually adds a percentage on top of what is offered by lenders that match your needs. This means that you'll probably get an direct lender. Not as much control. You can't choose which lender your information is shopped around with. If you are already working with a credit or bank union, it can be beneficial to apply with it. You may receive a lower price or better terms that you would otherwise. Unavailable for some purchase types. If you're looking to buy through a direct lender , indirect financing will obviously not be an option. How to obtain indirect auto financing The steps to obtaining the indirect financing for your vehicle are similar to the procedure for a conventional loan. Before you apply ensure that you be prepared with any documents the dealer has to provide to the lender's within their network. This step-by step guide will show how to move forward: Visit the dealership. Shop around and choose the vehicle you'd like to purchase. You can apply for an loan from the dealer. Acceptance is granted and you can choose the most suitable offer. Sign your loan documents. You can take possession of your . Alternatives to indirect auto financing If you're not looking to obtain an indirect auto loan from a dealer, there are several alternatives to finance your new vehicle. Bank Most banks provide loans for vehicles, however it can be an involved process. If you've got good credit the bank might be the way to go. However, if you don't have a poor credit score, this may not be the best choice. Credit union operate much like banks, however the members in the credit union will always be the main priority, not investors. You'll likely have to be a member of the credit union and membership requirements for members will vary from one to the next. A credit union that has auto loans can help you save money, and also give you greater flexibility. Online lender Using an online lender is another possibility to finance a car without the need of a dealership. The majority of online lenders are focused on offering low rates and affordable loan terms, rather than the hefty commissions you might find at a traditional dealership. The bottom line Indirect auto financing can be a practical option to finance your next ride. However, it's important that you before visiting the dealership as there could be a better deal elsewhere. It is also possible that the dealership will match or beat an outside loan offer to gain your business. Learn more


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Written by

This article was generated by using automated technology. It was then thoroughly verified and edited by an editor on our editorial staff.



The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances through providing concise, well-studied information that breaks down complex topics into manageable bites.






Auto loans editor


Reviewed by Mark Kantrowtziz Reviewed by Nationally recognized student financial aid expert

Mark Kantrowitz is an expert on student financial aid including the FAFSA, 529 plans, scholarships educational tax benefits, student loans.






Nationally acknowledged expert in student financial aid




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