If you are buying a car and want to borrow the money to pay for it, you have the options of (1) going directly to your bank or credit union and getting preapproved for a loan in a certain amount and with a certain interest rate, or (2) going to the car dealership and inquiring about dealer-arranged financing. One difference in these options is that with dealer-arranged financing the dealer may negotiate a higher interest rate with you than the bank offers, and take the additional money you pay in interest as compensation for the dealership. But if you are purchasing a new car, the car dealer may offer you lower interest rates than your bank or credit union.

In Alaska, when purchasing a car, you have the option to secure financing through a bank or credit union or to opt for dealer-arranged financing. If you choose to get preapproved for a loan from your bank or credit union, you will know the loan amount and interest rate in advance. This can provide a clear budget and potentially more negotiating power at the dealership. On the other hand, dealerships often offer their own financing options, which might include negotiating a higher interest rate than what a bank might offer. The dealership could earn a profit from this higher interest rate. However, it's also possible for dealerships, especially when dealing with new cars, to offer promotional financing rates that are lower than those of banks or credit unions. These rates are often part of sales promotions to encourage buyers to finance through the dealer. It's important to compare the total costs and terms of any financing option and to read the fine print before making a decision. An attorney can provide specific advice on financing agreements and help ensure that your rights are protected in any vehicle purchase transaction.