If you’ve found a car you want to buy, there’s a good chance the dealership will offer to arrange the finance for you.
It can be convenient to choose the car and finance it in the same place, but dealership finance isn’t your only option. You can also arrange finance separately through a car finance broker.
So, should you accept the finance offered by the dealer or compare your options first?
There isn’t one answer that suits everyone. What matters is understanding how each route works, comparing the full cost of the finance and choosing an agreement that comfortably fits your circumstances and budget.
What’s the Difference Between Dealership Finance and a Car Finance Broker?
When a dealership offers you finance, it will usually arrange this through the lenders or finance providers it works with.
A car finance broker focuses on arranging the finance separately from the vehicle purchase. Brokers work with a panel of lenders and can consider which of those lenders may be suitable based on your circumstances.
This can be useful because different lenders have different criteria. Your income, employment type, credit profile, existing commitments and even the vehicle you choose can influence the finance available to you.
Low Rate Car Finance is a credit broker, not a lender, and can introduce customers to a limited panel of lenders who may be able to provide finance for their vehicle purchase.
The Convenience of Dealership Finance
One of the main advantages of dealership finance is convenience. If you’ve already found the exact car you want, you may be able to agree the vehicle, discuss your deposit, apply for finance and complete the purchase through the dealership.
Some new vehicles may also be available with manufacturer-supported finance offers, which can be worth considering. However, convenience doesn’t necessarily mean you should accept the first finance quote you receive. Before committing, ask for the full details of the agreement so you can understand exactly what you’ll be paying.
Why Use a Car Finance Broker?
Using a broker gives you another route to arranging your car finance. Rather than relying solely on the finance available through one dealership, a broker can consider your application against lenders available on its panel.
This may be particularly useful if you’re:
- Self-employed
- A contractor or freelancer
- A company director
- Earning variable income
- Working within a particular monthly budget
- Looking to understand your finance options before choosing a vehicle
It can also be helpful if you simply want to compare what may be available before accepting a dealership offer. As with any car finance application, approval is subject to affordability, lender criteria and vehicle suitability.
Don’t Compare Finance on Monthly Payment Alone
It’s easy to focus on the monthly payment when comparing finance, but a lower monthly figure doesn’t necessarily mean you’re getting the cheaper agreement.
For example:
| Dealership Offer | Alternative Finance | |
|---|---|---|
| Deposit | £1,000 | £1,000 |
| Monthly payment | £299 | £315 |
| Agreement term | 60 months | 48 months |
| Total including deposit | £18,940 | £16,120 |
At first glance, the £299 monthly payment looks more attractive. But over the full agreement, you would pay £2,820 more.
These figures are illustrative only, but they show why it’s important to look beyond the headline monthly payment.
When comparing finance, consider:
- The deposit
- APR
- Monthly repayments
- Agreement length
- Any final payment
- Fees or charges
- Total amount repayable
A lower monthly payment could simply mean you’re borrowing for longer, contributing a larger deposit or leaving a larger payment until the end.
Should You Arrange Finance Before Choosing a Car?
You don’t necessarily have to find your car before exploring your finance options.
Understanding what you may be able to borrow and what monthly payment comfortably fits your budget can help you narrow down your vehicle search.
Instead of finding a £20,000 car and then asking whether you can make the payments work, you can start by deciding how much you’re comfortable spending each month and search for vehicles within that budget.
It’s a similar principle to any other major purchase: just because you may be able to borrow a certain amount doesn’t necessarily mean you should spend the maximum available.
Remember to leave room in your budget for insurance, fuel or charging, servicing, road tax and unexpected maintenance too.
Can a Broker Get You a Better Rate?
Potentially, but there are no guarantees.
The finance available to you will depend on several factors, including your credit profile, income, financial commitments, deposit, amount borrowed, agreement length, vehicle and the individual lender’s criteria.
Because a broker works with a panel of lenders, it may be able to identify an option that suits your circumstances. However, there may also be occasions where a dealership has a competitive finance offer available. The most useful approach is to compare the actual figures rather than assuming either route will always be cheaper.
Already Been Offered Finance by a Dealer?
If a dealer has already given you a finance quote, you don’t necessarily need to make an immediate decision.
Ask for the details of the proposed agreement and look particularly at:
- APR
- Deposit
- Monthly payment
- Number of payments
- Final payment, if applicable
- Fees
- Total amount repayable
You can then compare these figures with any alternative finance available to you. The aim isn’t to assume the dealership offer is poor. It’s simply to make sure you understand what you’re agreeing to before committing.
What If You’ve Already Been Declined?
Being declined by one finance provider doesn’t necessarily mean every lender will reach the same decision.
Different lenders have different eligibility and affordability criteria and may take different approaches to areas such as self-employment, variable income and previous credit history.
This is another situation where using a broker may be helpful, as they can consider which lenders from their available panel may be suitable for your circumstances.
Approval can never be guaranteed, however, and it’s generally best to avoid making repeated finance applications unnecessarily.
Will Comparing Car Finance Affect Your Credit Score?
This depends on the type of credit search being carried out. A soft credit search can be used to assess eligibility without affecting your credit score, while a lender may carry out a hard credit search if you proceed with a full finance application.
Low Rate Car Finance allows customers to check whether they may be pre-approved using a no-impact soft search before progressing further. If you’re unsure, always check what type of credit search will be carried out before submitting an application.
Dealership Finance or Broker: What Should You Compare?
Rather than concentrating on where the finance comes from, focus on the agreement itself.
Before deciding, ask yourself:
Are you comparing the same type of finance?
Hire Purchase and PCP work differently, so comparing them purely by monthly payment can be misleading.
Is the deposit the same?
A larger upfront payment can make one agreement appear cheaper from month to month.
Is the agreement term the same?
Spreading the finance over longer can reduce the monthly payment while increasing the overall cost.
Is there a final payment?
This is particularly important with PCP agreements.
What is the APR?
APR can help you compare the cost of borrowing.
What is the total amount repayable?
This gives you a clearer picture of what the agreement will cost overall.
Most importantly, make sure the repayments fit comfortably alongside your other monthly commitments.
Choosing the Right Finance for You
There isn’t one type of car finance that will suit every customer. Dealership finance can offer convenience and, in some cases, access to attractive manufacturer-supported offers.
Using a car finance broker gives you another way to explore finance and may allow your circumstances to be considered by different lenders available on the broker’s panel.
Whichever route you take, try not to make your decision based solely on the monthly payment. Look at the complete agreement, understand the total cost and make sure the repayments remain affordable throughout the term.
Explore Your Car Finance Options
If you’ve already been offered finance by a dealership, comparing your options before committing can help you make a more informed decision.
Low Rate Car Finance can help you explore finance whether you’ve already found your next car or you’re still working out what you can comfortably afford.
You can also check whether you may be pre-approved using a no-impact soft search before progressing with a full application.
Final Thoughts
Dealership finance and broker-arranged finance can both have their advantages. The important thing is not to assume that the first monthly payment you’re shown represents your only option.
Take the time to compare the deposit, APR, agreement length, total amount repayable and any final payment or fees. Ultimately, the right finance agreement is one that helps you buy the right vehicle while keeping the repayments comfortably within your budget.