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 Delaware, when financing a car purchase, you have two primary options: obtaining a loan from a bank or credit union, or opting for dealer-arranged financing. If you choose to get preapproved for a loan from a bank or credit union, you'll 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, dealer-arranged financing may offer convenience, as the dealership handles the loan process. However, dealerships might negotiate a higher interest rate than what you might qualify for with a bank, and the difference can serve as compensation to the dealership. It's important to note that for new car purchases, dealerships sometimes offer promotional financing with lower interest rates that may be more competitive than those from banks or credit unions. Regardless of the option you choose, it's advisable to compare the total costs and terms of any financing offers and consider consulting with an attorney or financial advisor to ensure you understand the implications of the financing agreement.