In-house financing car lots: This is own parking financing. Instead of taking out a loan from a bank or finance company, you get your car loan directly from your dealer.
If you have bad credit, an internal loan may seem like the only option, but that’s not always the case. You may have other, cheaper options.
What is internal financing?
Once you’ve decided to lease or buy, there are several options for financing your next vehicle. Internal used car financing is a popular choice due to its affordability and convenience.
So what is internal financing?
Some lenders connect you to other local lenders, but if you choose self-financing used car lots, you get the loan from the dealer themselves.
That means no middleman, no third party. This gives both the seller and the customer greater flexibility.
The dealer is not bound by the restrictions of other lenders and customers can get better terms – which is especially important for people with bad credit.
Why should you choose to self-finance used cars?
So why should you choose used car financing over your other options?
Self-financed used car lots offer a number of benefits that you won’t find anywhere else.
With self-financed used car lots, you can find everything from a single source, from sales to financing to service. Since the dealer lends the money himself, the approval process is much faster and easier.
You can optimize your budget by discussing insurance options and extended guarantees when applying for a loan.
Hendrick Chevrolet Cary also offers an unbeatable selection.
Whether in-house financing car lots you’re looking for a bargain to fit your budget or a certified pre-owned model for extra peace of mind, our team can help you find exactly what you need.
Are you wondering, “Where can I find used cars for self-financing near me?”
How does self-financing work for car dealers?
Car dealers with in-house financing are a one-stop shop. In other words, the dealer lends you the money (via a loan) so you can buy a car.
Compared to traditional car loans, internal loans are much easier to qualify for. The retailer sets its own eligibility requirements and does not follow those of any bank or finance company.
An in-house finance dealer may not manage your credit score at all.
This can be a win-win situation for traders. Internal financing allows them to sell more cars (because more people qualify). They can also charge interest and fees on the loans they make.
However, self-financing is not always the best choice for car buyers. People who turn to self-financing often have bad (or no) credit.
Knowing that they may be the only ones willing to lend to these buyers, the dealer charges extremely high interest rates and fees.
Watch out for pre-calculated interest
Some self-financing car dealers offer loans with pre-calculated interest rates. With this model, the dealer adds your interest to your principal amount at the beginning of your loan.
Then your total balance (including this interest) will be divided into monthly payments.
Pre-calculated interest rates are not beneficial for you as a car buyer. Any additional payments you make at the start of your loan count towards your interest, not the principal amount.
Pros and cons of internal financing
Although internal financing is not ideal, it does offer some advantages.
Benefits
Easier approvals: Internal financiers are not bound by the approval requirements of banks and financial companies.
In-house dealers target those who are ineligible for a loan elsewhere due to their credit rating or low income – or possibly both.
Same Day Car Loans: Your dealer doesn’t have to send your loan application to a finance company for review, so you’re likely to get your loan right away.
However, keep in mind that there are cheaper ways to get an instant car loan that do not require self-financing.
No Down Payment May Be Required: Many in-house car finance lenders specialize in no down payment car loans for people with bad credit.
While skipping the deposit can cause many problems (more on that later), it can be necessary in an emergency.
May offer a non-traditional billing plan: Some in-house car dealers let you pay weekly or bi-weekly instead of monthly.
Disadvantages of in-house financing car lots
Higher interest rates and fees: Although states typically have laws capping maximum annual percentage rates (APRs) for auto loans, these laws are not standardized.
Additionally, some states allow retailers to charge any APR as long as the retailer notifies the state in advance.
Most in-house car finance providers have older models in stock.
You’re more likely to go underwater: If you owe more on your car loan than the car is worth, you’re underwater. This is also known as a reverse car loan.
Reverse car loans are more likely if the car is older or not in good condition (because then it won’t be worth as much).
In addition, internal loans have high interest rates, meaning you owe more than if you had taken out a loan from a traditional lender.
Your credit score may not improve: If a dealer offers financing without checking your credit history, they may not report your payments to the credit bureaus.
In this case, your hard work to pay on time will not improve your credit score.
Why choose the car dealer’s internal financing?
After all, the dealership that offers in-house financing for cars and SUVs definitely wants to see you behind the wheel! This means they are likely to be more flexible and offer benefits such as:
A streamlined pre-approval and trade-in process
Extended warranties and bundled coverage options
Availability for drivers with suboptimal credit scores
If you’ve had trouble getting a loan through a traditional lenders, seeking in-house financing from car dealers may be a better option.
Making all your payments on time can even improve your credit score.
What you should pay attention to
Not all self-financing car dealers have your best interests in mind.
Be careful about letting yourself drive off in the new vehicle before you have a payment plan in place.
If your dealer doesn’t report to a credit bureau, they’re more likely to offer a plan you can’t actually afford.
If you get approved for a moment but then learn that your financing plan has fallen through, you are not working with a reliable lender.
Financing with When you apply for financing with our team, we’ll do everything we can to help you create a plan that fits your budget.
Alternative to internal financing
Lenders online
You can find a bad credit car loan by shopping around online lenders That doesn’t mean everyone will get approved, but you may still get lucky even if you have bad credit.
To make it easier, you can search for five car loans at once on LendingTree’s car loan marketplace.
