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Indirect auto financing: What is it and is it an ideal idea? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by providing you with interactive financial calculators and tools that provide objective and original content. We also allow you to conduct research and compare information at no cost and help you make sound financial decisions. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies that pay us. This compensation may impact how and when products are featured on the site, such as for instance, the order in which they appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. This compensation, however, does not influence the information we provide, or the reviews that you read on this site. We do not include the vast array of companies or financial offers that may be open to you.



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3 minutes read. Published 21st October 2022
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At Bankrate we take the accuracy of our content very seriously. "Expert verified" signifies we have the Bankrate Financial Review Board thoroughly evaluated the content to ensure clarity and precision. This Review Board comprises a panel of experts in finance whose goal is to ensure that our content is always neutral and fair. Their evaluations hold us accountable for publishing quality and reliable content.




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

Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with clear, well-researched facts that break down otherwise complicated topics into bite-sized pieces.







Review by Mark Kantrowtziz. Reviewed by Nationally acknowledged student expert in financial aid

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









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Indirect auto is when the lender offers financing to the vehicle seller rather than directly to the purchaser. The seller then transfers the financing to the buyer. Lastly, the buyer pays each month regular payments to the lender that the dealer has a relationship with to repay the loan. This type of financing for vehicles comes with benefits and drawbacks therefore it is crucial to be aware of all options prior to signing an indirect auto loan. How can you get indirect auto finance? Indirect auto financing is available through lenders who are part of their network of partners. Instead of seeking an loan and getting preapproved prior to visiting the dealer to get the financing when you purchase the vehicle. In turn, the seller is paid the commission or some other form of payment to connect you with the lender. This could take the form of a percentage added to the interest rate. When you make the final payment, the lender will let the lien or title of the car to. In the loan term, you will also be charged interest on the loan, just as you would with a . Other direct loans Indirect loans could also be a reference in the way of using brokers or marketplaces. These options let you enter your personal information and then are matched to several lenders. Most of the time, your credit score won't be impacted since these online marketplaces just need the submission of a soft inquiry. In addition, you'll be able view possible loan offers that include the estimated monthly payment, repayment period and interest rate in order to make an informed choice. Prior to deciding on a loan you should also compare the total cost of the loans. Pros and cons of indirect financing While indirect financing could help you get the most seamless experience when buying a car but there are also disadvantages to think about before you make a move. Advantages of indirect financing in some cases, it makes better sense . Shop and purchase in one place. It's generally more convenient to purchase from the dealership. You'll be able to shop and get financing on the next day. Less legwork. Though it is still a good idea to do so, it's not essential. If you'd like to go without contacting other lenders prior to deciding on your vehicle. Bad credit options available. Specialty dealers have options for buyers with less-than-perfect credit. Cons of indirect financing Before you make a trip to the dealer without a preapproval from an external lender take note of these disadvantages. The higher rates. The dealership usually adds a percentage on over what is provided by lenders that meet your requirements. This means that you will likely get a with an direct lender. You won't have so much of a control. You can't choose the lender your information is shopped around with. If you're already working with a bank or credit union, it could be beneficial to sign up with it. You could receive a lower rates or conditions than otherwise. Unavailable for some purchase types. If you're trying to purchase directly from a lender, then indirect financing will obviously not be an option. How to get indirect auto financing The steps to obtaining direct auto finance are comparable to those for a traditional loan. However, before applying, be sure to have all the documents available that the dealer will need to submit to the lender's in their network. This is a step-by-step guide on how to move forward by visiting the dealership. Explore the options and pick the car you want to drive. You can apply for a loan at the dealership. Be approved and select the best deal. Sign your loan documents. You can take possession of your . Alternatives to auto financing indirect If you're not looking to obtain an indirect auto loan through a dealership there are alternatives to finance your future car. Bank Most banks offer loans for vehicles, however it can be a more involved process. If you've got good credit and a good credit score, a bank may be the right choice. But if you , this might not be the best choice. Credit unions function similarly to banks, however the members in the credit union will always be their primary priority, not investors. You will likely need to join the credit union, and the requirements to join will differ from one to the next. However, joining a credit union that has auto loans can save you money and offers greater flexibility. Online lender Using an online lender is another option to finance a car, without having to go through a dealer. A lot of online lenders concentrate on offering low rates and fair loan terms, rather than the high commissions you could find at a traditional dealership. The bottom line Indirect auto financing is a great solution to help you purchase your next ride. But, it's essential to ensure you do your research prior to visiting the dealer as there could be a better deal elsewhere. It is also possible that the dealer is willing to compete with or beat an outside loan offer to gain your business. Learn more


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Written by

This article was generated with the help of automation technology, and then verified and edited by an editor on our editorial staff.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances by providing concise, well-studied information that breaks down complicated subjects into digestible pieces.






Auto loans editor


Review by Mark Kantrowtziz. Reviewed by Nationally acknowledged expert in student financial aid

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






Nationally recognized student financial aid expert




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