Key takeaways
- Dealer finance limits you to the lenders the dealer works with, and the rate is often tied into the price negotiation.
- Pre-approval lets you negotiate as a cash-ready buyer and compare the dealer's offer against the wider market.
- Promotional low rates can come with a higher car price, fees or a large balloon. Compare the total cost.
- Any car loan counts against your home borrowing power, so plan the order if you're buying property soon.
Shopping for a car? See how our car loans work.
How does dealer finance work?
The dealer arranges a loan through one of the lenders it has an agreement with, and the finance is usually discussed alongside the car price. It's fast and can be done on the spot. The trade-off is choice: you see the options that dealer offers, and it can be hard to tell how much of the deal is in the price and how much is in the finance.
How does arranging your own finance compare?
With pre-approval from a lender you choose, you know your budget before you walk in. You can negotiate the car price on its own, then compare the dealer's finance offer against what you already have. If the dealer's offer is genuinely better, you can take it.
At a glance
| Dealer finance | Your own car loan | |
|---|---|---|
| Lender choice | The dealer's panel | Wider market |
| Speed | Often same day | Pre-approval first, then quick settlement |
| Negotiating position | Price and finance negotiated together | Price negotiated separately |
| Private sales | Not available | Often available |
What about 0% or low-rate offers?
Manufacturer promotions can be good value, but check what comes with them. Low-rate deals may apply only to certain models, require a larger deposit or balloon, carry higher fees, or come without the discounts a cash buyer could negotiate. Compare the total amount you'll pay over the loan, including the car price, not just the rate.
What to compare
- The interest rate and the comparison rate.
- Establishment, monthly and early repayment fees.
- Any balloon or residual, and how you'll pay it.
- Whether you can make extra repayments or pay out early.
- Add-ons bundled into the loan, such as insurance or warranties.
Buying a home soon?
A car loan repayment reduces what lenders will let you borrow for a home. If you plan to buy property in the next year or two, talk to us before financing a car. See your car loan vs your home loan.
Get pre-approved before you shop
We'll compare car loans across lenders so you can negotiate as a cash-ready buyer.
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Frequently asked questions
Is dealer finance more expensive?
Not always, but it limits your choice and can make the total cost harder to compare. Getting a competing offer first helps.
Can I use my own finance at a dealership?
Yes. Pre-approved finance works like cash for the dealer.
Are add-ons in dealer finance worth it?
Sometimes, but they increase the amount you borrow and pay interest on. Consider them separately.
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This guide is general information only and does not take your personal circumstances into account. It is not financial, credit, tax or legal advice. Examples are illustrative only. Government schemes, lender policies and rates change over time and eligibility criteria apply. Speak with us for advice tailored to your situation. LendQuest Pty Ltd is a credit representative (555514) of BLSSA Pty Ltd, Australian Credit Licence 391237.