Car Finance: A Guide for Fixed Operations Directors and Dealership Managers

by Kristine on April 5, 2023

car finance

Car financing is an essential aspect of the automobile industry. Understanding the nuances of car finance is crucial to ensuring the success of the dealership.

When it comes to financing a car purchase, customers have two primary options: direct lending and dealership financing. Direct lending involves obtaining a loan directly from a financial institution, while dealership financing involves obtaining a loan through the dealership where they're purchasing the car.

As a customer, choosing between these two options can be overwhelming, especially if they are not familiar with the car-buying process or the ins and outs of car financing. That's where a car dealership can help.

At the dealership, you have the opportunity to work with a finance specialist who can guide customers through the financing process and help them make informed decisions based on their unique financial situation. They can explain the pros and cons of each option, as well as the interest rates, loan terms, and incentives available.

Ultimately, the goal of the dealership is to help customers find the financing option that best fits their needs and budget, so they can drive away in the car of their dreams with confidence.

Here are some tips about the pros and cons of each option:

Direct Lending

Direct lending involves obtaining a loan directly from a financial institution such as a bank, credit union, or online lender. With direct lending, they apply for a loan and receive the funds directly, which they can then use to purchase a car from a dealership or a private seller. The interest rate and loan terms are typically based on their credit score and financial history.


  • Lower interest rates: Direct lenders typically offer lower interest rates than dealerships because they don't have the overhead costs associated with running a dealership.
  • More flexibility: Direct lenders can provide more flexible loan terms and repayment options than dealerships.
  • No dealership involvement: Working with a direct lender means they are not tied to any particular dealership, giving customers more freedom to shop around for the car they want.


  • Longer approval process: Direct lenders may take longer to approve a loan application than dealerships, which can delay the car-buying process.
  • Fewer incentives: Direct lenders may not offer the same incentives as dealerships, such as special programs from manufacturers or incentives from banks.
  • Limited customer support: Direct lenders may not provide the same level of customer support as dealerships, especially when it comes to servicing and maintenance issues.

Dealership Financing

Dealership financing involves obtaining a loan through the dealership where they are purchasing the car. In this case, the dealership acts as a middleman between the customer and the lender. The dealership may work with multiple lenders to find the best financing option for the customer, and they can often complete the entire car-buying process, including financing, in one place. The interest rate and loan terms may depend on the customer's credit score, as well as the type of car they are purchasing and any incentives being offered by the dealership or manufacturer.


  • Convenience: Dealership financing is often more convenient than direct lending because they can get everything done in one place, from choosing the car to securing financing.
  • Faster approval process: Dealerships can often approve loans quickly, allowing the customer to drive away in their new car sooner.
  • More incentives: Dealerships may offer special incentives such as cashback offers or low financing rates to help customers save money.


  • Higher interest rates: Dealerships may charge higher interest rates than direct lenders to cover their overhead costs.
  • Limited choices: Dealerships may only work with certain lenders, limiting customer options.
  • Pressure to buy: Dealerships may pressure customers to buy a car, even if it's not the right fit for the customer or their budget.


Ultimately, the best financing option for your customer will depend on their personal situations and preferences. It's important to understand and compare rates and terms from different lenders, including both direct lenders and dealerships, to find the best deal. Additionally, having a solid understanding of the financing process and what to expect can help customers make informed decisions and avoid common pitfalls.

Benefits of car financing for dealerships

  1. It allows you to increase sales by allowing customers to purchase more vehicles than they otherwise would be able to. This can help your dealership achieve higher revenue goals and meet its projected growth projections for the next year or two.
  2. Car financing creates a long-term revenue stream for your dealership. When a customer takes out a loan through you, they're likely going to continue buying cars from you in the future--especially if those cars are financed through your company again! This builds customer loyalty and keeps them coming back each time they need another vehicle purchase or upgrade (which is great news for any business).
  3. Offering financing can help build customer loyalty and create repeat business. Financing options like these give people who might not otherwise be able to continue buying new cars without assistance an opportunity to do so--and that's always good news! It provides access not only within communities but also across socioeconomic classes as well; anyone who wants their own wheels will now have one available thanks partially due to efforts made towards expanding financial literacy among consumers over time.

Choosing the right financing partner

When selecting a financing partner, it's essential to choose a reputable and experienced company. This partner should have a track record of delivering quality services and should be able to offer competitive rates. It's also important to ensure that the financing partner is aligned with your dealership's values and goals.

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In conclusion, car finance is an essential aspect of the automobile industry. Understanding the basics of car finance is crucial to ensuring the success of the dealership. By offering car financing, dealerships can increase sales, create a long-term revenue stream, and build customer loyalty. Quickride's dealer management platform is an excellent option for dealerships looking to keep building customer loyalty after the sale. Sign up for our 30-day free trial today and see the benefits for yourself!


Topics: car dealerships, future cars, car finance