Loan vs. 0% Dealer Financing Calculator

Loan vs. 0% Dealer Financing Definition

Buying a new or used car requires some patience. While picking out a car is really exciting, setting up financing to purchase a car with dealerships can be a hassle. There are two main methods for financing your car. Financing a vehicle purchase means that you borrow money from a lender with an agreement to pay the money back with interest over a period of time. With so many car lenders on the market these days such as banks, credit unions and special finance companies, many buyers can easily secure an auto loan before going to a dealer.

However, car manufacturers or dealers also offer financing options, but some dealers may have strict requirements for good credit scores. Before you go vehicle shopping, you can make it easier to understand your financing options by using a loan vs. 0% dealer financing calculator.

This calculator provides you with an easy-to-use form that calculates the difference between auto loans from lenders and dealers. In addition to this calculator, there are some other things you should consider before heading out to the car lot.

Are Pre-Approved Auto Loans a Good Option?

An auto loan from a bank or other financial institution outside of a dealership will typically have specific loan agreements that include APR and loan terms or time period. During the loan term, you’ll make payments that usually include interest on the vehicle, which is calculated using APR. Typical loan terms are 36 months, but there are longer periods like 96 months.

When you have a longer loan term, you’ll have a smaller payment, but you could also end up paying more interest over time, which increases the price of the car. When you secure a loan directly from a bank or credit union, this is called direct lending, and it’s not always the best option.

While you may be able to have confidence in the car amount you can afford to buy, you may end up spending more than the car is worth because of interest. The loan calculator on this page shows you the comparison. Depending on the APR or interest rate, you may not be getting such a good deal by going to a lender first.

Should You Get Dealer Financing?

Dealer financing means that you enter into an agreement that the dealer arranges personally for you. You agree to pay back the money that you borrow to pay for the vehicle with interest over a certain period of time. The lender may choose to keep the contract or it can also assign it to another financing institution. This institution would manage the account and collect your payments.

In most cases, dealers are looking for buyers who can pay back a loan quickly, so they are offering incentives. One of those incentives is 0 percent financing, which means that you don’t pay any interest. When you compare this to direct lending, dealer financing is always preferred because it has a low to no interest rate, which means you are only paying on the price of the car.

Is Dealer Financing An Option For You?

Every dealer is different and has their own policies when it comes to approving a buyer for a loan. The best way that a car buyer can find a good deal is to look for dealers that are offering 0 percent financing and low money down with rebates. This means that you’ll have the lowest upfront and overall costs.

Most dealers will work with all buyers, but it’s important to check what credit scores are approved for 0 percent financing options.

How to Calculate Loan vs. 0% Dealer Financing

Let's be honest - sometimes the best loan vs. 0% dealer financing calculator is the one that is easy to use and doesn't require us to even know what the loan vs. 0% dealer financing formula is in the first place! But if you want to know the exact formula for calculating loan vs. 0% dealer financing then please check out the "Formula" box above.

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