Finding the right auto loan company is easier than many think. There are three major types of lenders offering their services to the retail automotive industry:
Captive finance sources are those related to or subsidized by a major auto manufacturer. They are easy to spot because the related manufacturer’s name is included in the lender’s name. Major players in this segment include GMAC, Ford Motor Credit, Chrysler Financial, Mercedes-Benz Financial, and Volvo Car Finance North America, among others. Captive finance sources offer no- or low-interest loans on vehicles that are in low demand. These lenders also offer special low-rate leasing. Captive finance sources usually have the strictest lending/underwriting policies, so those with credit scores under 700 may have mixed results financing with a captive lender.
Traditional banks and credit unions offer a variety of direct and indirect (dealer-related) financing for individuals in many credit positions. Large retail lenders offer competitive rates, familiar brand names, and excellent customer service for those interested in pre-owned vehicles or those who do not qualify for low-APR offers supported by the manufacturer. Several banks and credit unions offer leasing programs as well, and some banks are more lenient on their leasing policies than captive finance sources. Clients with all types of credit scores can find success working with such lenders.
Secondary finance sources offer opportunities for those with some bumps in their credit to re-establish themselves. Those with credit scores under 600 are normally good candidates for a secondary/special finance loan. With a special finance loan, you can expect a high interest rate (up to 24.99% in some jurisdictions), but financing a quality pre-owned vehicle can help you rebuild your credit and have a reliable vehicle that can serve you well for many years. After a successful secondary loan, you can expect to qualify for better offers on your next vehicle.
Regardless of which option works for you, a finance professional at a local dealership or bank can help steer you in the right direction when it comes to your next loan. There are many options, and it can be difficult to determine which is best for you.