The Pro's and Con's of Getting that Used Car Loan Through the Dealer

Car dealer loans can be a bad deal for the buyer. If this is the only way you can buy a car, it might still be the best option for you. You just need to be able to read and understand the fine print in the contract. Sometimes you need to take a second person along to help you preview what you are signing. It's alright to sign something that may not be the best deal in town if you get what you want. Just make sure that you know what it will cost and what your responsibilities are. Sometimes it's better to get a bad deal than no deal. You have to be the judge based on your needs and your ability to repay the loan.

Most of the time, if the dealer helps arrange the loan, the bank involved has a short fuse for late fees and a higher interest rate. That is why they can give such quick approval. Their potential reward is great. Sometimes these banks have an arrangement with the dealer regarding repossession and resale. This can work against you if your financial situation is too precarious.

If you default, the dealer comes and gets your car. He can resell it and make commissions again. The bank gets their money continuing to roll in. The interest rates are high enough that even if they don't get a payment for a few months, they will still make money.

If this can happen two or three times on the same vehicle, both the bank and dealer have recouped all of their costs and investments. This means everything from here on is gravy. They don't mind a shaky risk because it increases the odds that they will make more money in the long run. The good news is that this probably won't hurt your credit because you don't have much anyway. Another dealer with another high risk bank will take you on again for similar terms.