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 Connecticut, when financing a car purchase, consumers have the option to either secure a loan directly from a financial institution like a bank or credit union, or to opt for dealer-arranged financing. If a consumer chooses to get preapproved for a loan from a bank or credit union, they will agree to a set loan amount and interest rate based on their creditworthiness. On the other hand, with dealer-arranged financing, the dealership may facilitate a loan through their own network of lenders. Dealerships might negotiate a higher interest rate than what the consumer might qualify for directly from a bank, and the difference in interest can serve as compensation to the dealership. However, dealerships sometimes offer promotional financing rates, especially for new cars, which can be lower than those offered by banks or credit unions. It's important for consumers to compare the total costs and terms of any financing option to ensure they are getting the best deal available to them.