There are pros and cons to financing your car purchase with dealer financing or\u00a0with a bank or credit union loan. It\u2019s important to understand\u00a0the benefits and the process to determine which loan is truly best.\r\n\r\nDealership Financing\r\n\r\nDealership at times offer great financing deals but you have to be aware of the specific rules used to determine your interest rate, payment terms and conditions. Many people who are lured into a dealership because of 0% financing find they are not eligible for the promotion. Dealers can offer financing from the automakers financing arm or through partnerships with lenders. When a car salesman runs your credit report\u00a0it\u2019s shared with a number of partner lenders who will respond with a decision. You might never know how many of those lenders approved you as the dealer may only choose one to share. Be careful with the offers and don\u2019t be pressured into a taking a loan. You want to make sure the lender is a reputable company with a solid track record. If you happen to have less than perfect credit, you might find the loan offers from unknown lenders offering high interest rates and fees. Some of these loans could include additional charges such as origination fees or penalties for early payoff.\r\n\r\nBank and Credit Union Financing\r\n\r\nBanks and credit union financing may be more ideal for majority of people who have good to excellent credit. A key benefit of financing through a bank or credit union is that you can get pre-approved for a loan amount and use that approval to help you negotiate on a car purchase. You\u2019re also not in the grasp of the car salesman who may get a commission for choosing to offer you one financing option over another. Additionally, banks and credit unions may offer lower interest rates with better terms saving you more money in the long-run. Financing your car directly with your bank or credit union is pretty hassle free and dealerships know how to handle these types of purchase transactions.\r\n\r\nHow to choose between dealership financing and bank\/credit union loans\r\n\r\nNo matter which financing you choose, make sure you do your research and compare the offers. Do not feel pressured to take on a\u00a0loan\u00a0from a dealer and be okay to walk away from the deal if you feel uncomfortable. Know your credit report and credit score before applying for any car loan. This will help you determine what you\u2019ll need to fix or improve to get the best rate and term possible. Get a pre-approval from your existing banking relationship, a credit union and another financial institution. If you are shopping for an auto loan from different lenders, credit scoring algorithms such as FICO will count multiple hard inquiries as one within a 30 day period. So you can feel assured you\u2019re making the best decision before choosing a loan.