Considering In-House Financing Car Dealerships: Do These 9 Things First

Alright, folks! James here, your friendly neighborhood car expert with over two decades of experience in the world of buying and selling vehicles. 

Today, I’m here to share some knowledge, on the topic of in-house financing car dealerships and specifically 9 things you should do when considering this option of finance.

Putting yourself in the best position possible when negotiating for that dream car.

in-house financing car dealerships
Negotiate and ask 100’s of questions!

These are actionable things you can do, so buckle up, and let’s dive right in.

1. Research Different In-House Financing Car Dealerships

In the vast landscape of the automotive industry, in-house financing car dealerships have carved a unique niche. 

These dealerships, offering both vehicles and financing under one roof, promise convenience and accessibility. 

However, as with any significant financial commitment, diving in without adequate research can be a recipe for disaster.

Start your journey with the obvious one, the internet. Google is your friend here and a simple online search can yield a long list of dealerships in your local area. 

But don’t just stop at the names like so many so; dig deeper into customer reviews and ratings on platforms like Yelp, and the Better Business Bureau

These reviews, often candid and detailed, provide invaluable insights into the dealership’s reputation, customer service quality, and transparency in their financing terms.

However, while online research is a potent tool, it’s essential to complement it with offline efforts. 

Attend local automotive events, trade shows, or even weekend car markets. 

Engaging directly with dealership representatives in these settings can offer a more tangible sense of their offerings and ethos. 

Furthermore, these events often host multiple dealerships, allowing for easy comparison.

Lastly, never underestimate the power of personal recommendations, (this is probably my favorite one). 

Friends, family, or colleagues who have already been through the process of in-house financing can provide valuable firsthand accounts of their experiences, guiding you toward reputable dealerships and warning against potential pitfalls.

By dedicating time and effort to thorough research, you lay a solid foundation for a positive experience, ensuring you drive off not just with a car, but also with peace of mind.

2. Compare Interest Rates

The main attraction of in-house financing often lies in its promise of a seamless car-buying experience. 

However, beneath the surface of this convenience, the interest rates can play a pivotal role in determining the true cost of that convenience. 

Comparing interest rates isn’t just about seeking the lowest number; it’s about understanding the long-term implications of that rate on your finances.

When you step into the world of in-house financing, you’ll quickly realize that interest rates can vary significantly between dealerships. 

This variance is influenced by multiple factors, from the dealership’s operational costs to their assessment of your creditworthiness. 

While one dealership might offer a seemingly attractive rate, another might present a slightly higher figure but with more favorable terms.

To navigate this maze, start by gathering written quotes from multiple dealerships. 

This documentation not only allows for easy side-by-side comparison but also serves as a negotiation tool. 

Armed with these quotes, you can often leverage a better deal, especially if a dealership is keen to secure your business.

But remember, the interest rate is just one piece of the puzzle. 

Dive into the details. 

Are there hidden fees or charges that might inflate the effective rate? 

Is the rate fixed, or is there a possibility it might fluctuate during the loan’s tenure? 

How does the rate translate into monthly payments, and more importantly, the total amount paid over the loan’s lifespan?

By comparing interest rates and understanding their broader implications, you ensure that your in-house financing decision isn’t just about immediate convenience. 

Instead, it becomes a well-informed choice that aligns with your long-term financial well-being, ensuring that the joy of your new car isn’t overshadowed by financial burdens.

3. Check Your Credit Score

It can be stressful if there is an urgent need for a new car, maybe your current car has broken down or you’re due to start a new job that requires a car but before diving into the world of in-house financing car dealerships, it’s paramount to understand where you stand credit-wise. 

Your credit score, a numerical representation of your creditworthiness, can significantly influence the financing terms you’re offered. 

Think of it as your financial report card, with lenders and dealerships playing the role of discerning teachers.

In-house financing car dealerships often cater to individuals with varied credit histories, including those with less-than-stellar scores. 

However, the terms of financing can vary dramatically based on your credit score. 

A higher score might fetch you a more favorable interest rate, while a lower one could mean higher rates or stricter terms. 

Knowing your score in advance equips you with the knowledge to negotiate better and understand what’s a fair offer.

Several online platforms offer free credit score checks, providing not just the score but a breakdown of factors influencing it. 

If your score isn’t where you’d like it to be, understanding these factors can help you take corrective measures. 

Improving your credit score, even by a few points, before approaching in-house financing car dealerships can lead to substantial savings over the loan’s duration.

Moreover, being armed with your credit information prevents dealerships from potentially taking advantage of perceived financial vulnerabilities. 

It’s always better to walk into negotiations with all the cards on the table, ensuring you secure the best possible deal.

4. Inquire About Vehicle Selection

When considering in-house financing car dealerships, the focus often gravitates toward the financing aspect. 

However, let’s not forget the primary purpose: securing a vehicle that meets your needs. 

Dealerships typically offer a diverse range of vehicles, from sedans and SUVs to trucks and more. 

But different dealerships will have different inventory so how do you ensure that they align with your requirements?

Start by visiting the dealership’s website. 

Most in-house financing car dealerships maintain updated online inventories, complete with detailed specifications, images, and sometimes even customer reviews. 

This digital window shopping can provide a preliminary idea of what’s on offer and whether it matches your criteria.

I personally like to find the exact car I want before visiting the dealership but sometimes the online inventory might not be up-to-date.

Hence, a physical visit to the dealership can be invaluable. 

Engage with the sales representatives, communicate your needs, and let them guide you through their collection. 

Their insights, combined with your research, can help pinpoint the perfect vehicle.

Lastly, remember that in-house financing car dealerships often have dynamic inventories that change by the hour. 

New vehicles come in, and old ones get sold. 

If you don’t find your ideal car on the first visit, don’t get disheartened. 

Establish a good relationship with the dealership, and they might notify you when a vehicle matching your description becomes available.

5. Read the Fine Print

The devil, as they say, is in the details.

The fine print of your financing agreement can hold crucial information that might not be immediately evident in the glossy brochures or the persuasive sales pitch.

First and foremost, in-house financing might offer unique terms that differ from traditional lenders. 

This could include specific clauses related to early repayment, penalties for missed payments, or even stipulations about vehicle maintenance and servicing. 

Being aware of these details can prevent unpleasant surprises down the line.

Furthermore, while car dealerships can be more lenient with credit approvals, this flexibility might come at a cost. 

Hidden fees, admin fees, balloon payments, or escalating interest rates can be buried in the fine print. 

It’s essential to understand the long-term implications of these terms, as they can significantly impact the total cost of your vehicle.

Lastly, always be wary of clauses that seem restrictive or punitive. 

Some dealerships might include terms that limit your ability to refinance or sell the vehicle. 

Others might have strict repossession policies that could leave you without a car after a couple of missed payments.

If certain terms seem ambiguous or unclear, seek clarification. 

It’s better to ask questions upfront than to be caught off guard later on.

Take the time to read and understand every clause, consult with trusted advisors if needed, and ensure that your dream car doesn’t turn into a financial nightmare.

The salesperson might not want you sitting at their desk for 4 hours whilst you’re going through a contract but in my experience, the ones that try to hurry you, have something to hide.

6. Ask About Credit Reporting

In-house financing car dealerships often cater to individuals with a diverse range of credit backgrounds. 

For many, this is a golden opportunity to not only secure a vehicle but also to rebuild or enhance their credit score. 

But here’s the catch: this positive impact on your credit is only possible if the dealership reports your payment activities to the major credit bureaus.

Before you shake hands on any deal, it’s imperative to ask the dealership about their credit reporting practices. 

Why? Because consistent, timely payments can significantly boost your credit score, but only if these payments are reported. 

A positive credit history can open doors to better financing rates in the future, be it for another car, a home, or any other significant purchase.

However, if the car dealership doesn’t report to the credit bureaus, your diligent payments won’t benefit your credit score. 

While the immediate goal is the vehicle, always keep an eye on the long-term benefits of your financial decisions. 

By ensuring that your chosen dealership reports to credit bureaus, you’re not just investing in a car, but also in your financial future.

7. Explore Traditional Financing Options

While in-house financing offers undeniable convenience, it’s essential not to put all your eggs in one basket. 

Before you get lured by the convenience they offer, it’s essential to explore traditional financing options. 

Why, you ask? Let me break it down for you.

Firstly, traditional lenders like banks and credit unions often offer competitive interest rates. 

While in-house financing car dealerships can provide quick approvals, especially for those with less-than-perfect credit, their interest rates can sometimes be on the higher side. 

As I’ve already mentioned over the life of a loan, even a small difference in interest rates can translate to a significant amount of money. 

So, by exploring traditional financing options, you might just find yourself a deal that saves you a pretty penny in the long run.

Traditional lenders also provide a more transparent process. 

They have set protocols, clear terms and conditions, and standardized documentation. 

This transparency ensures you’re well-informed about every aspect of your loan. 

On the other hand, in-house financing car dealerships might have varying processes, which could lead to some unexpected surprises down the road.

By securing a loan from a traditional lender, you’re likely to have more negotiating power at the dealership. 

With your financing already in place, you can focus solely on the price of the vehicle, potentially getting yourself a better deal. 

In contrast, when you opt for in-house financing, the dealership knows you’re reliant on them for both the car and the loan, which might reduce your bargaining leverage.

8. Negotiate Terms

Ah, the art of negotiation! 

It’s not just for flea markets or reality TV shows; it’s a vital skill when diving into the world of in-house financing car dealerships. 

While the shiny exteriors and the roar of the engines might be distracting, remember that there’s more to a car deal than just the sticker price.

In-house financing car dealerships, with their promise of easy approvals and a vast array of vehicles, can sometimes give the impression that their terms are set in stone. 

But here’s a little secret from someone who’s been in the game for over two decades: almost everything is negotiable. 

From interest rates to those tempting add-ons like extended warranties or service packages, there’s room to haggle.

Even ask them to fill the tank up!

Now, you might wonder why negotiation is so crucial. 

I know I’ve mentioned this but I want to stress the point that even a slight reduction in interest rates or a small concession on add-on prices can lead to significant savings over the life of your loan. 

And let’s face it, who doesn’t like saving money? 

Especially when it can be used for those road trips you’ve been dreaming about.

But here’s the trick: approach negotiations with a clear understanding of market rates and a firm idea of what you’re willing to compromise on. 

Negotiating can be an intimidating experience for some but do your homework, be confident, and remember that the dealership wants to make a sale. 

Every concession you secure, no matter how minor it seems, contributes to long-term savings and added value. 

Always be willing to walk away, even if it’s the car of your dreams, or you are desperate for a new car.

Being able to walk away is the greatest negotiating power you have.

9. Regularly Review Your Loan

The world of finance is ever-evolving, it’s not just about getting a loan; it’s about staying on top of it. 

Especially when you’ve secured a deal with in-house financing car dealerships, it’s essential to keep a keen eye on your loan’s progress. 

Think of it as a regular health check-up but for your finances.

Financial situations are as dynamic as the seasons. 

One moment you’re cruising smoothly, and the next, an unexpected expense throws a wrench in your plans. 

This fluidity is why it’s crucial to make it a bi-annual ritual to review your car loan. 

By doing so, you can gauge if you’re still getting the best deal or if there’s room for improvement.

For instance, global economic shifts can influence interest rates. 

If rates have dropped since you secured your loan from a car dealership, there might be an opportunity for refinancing. 

Refinancing can potentially lower your monthly payments or reduce the total interest you’ll pay over the loan’s lifespan. 

On the flip side, if your financial situation has improved or your credit score has seen a positive uptick, you might be in a position to increase your monthly payments. 

This proactive approach can significantly shorten your loan’s duration, leading to substantial interest savings.

Final Thoughts

So there you have my top 9 things to do when considering in-house car finance. 

By following these steps, you’ll be well-equipped to navigate the intricacies of in-house financing car dealerships, ensuring a decision that aligns with both your vehicular and financial needs. 

If in-house financing is new to you then I wrote a comprehensive guide on the process from start to finish which you may find useful and can be found here.

Safe travels!

Please note: 

I am not a financial advisor, and the content of this article is not intended as financial advice. 

Always seek guidance from a professional financial advisor or relevant expert before making any significant financial decisions.

Leave a Comment