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 Hawaii, when financing a car purchase, you 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 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 when shopping for a car and potentially offer more negotiating power at the dealership. On the other hand, dealerships may offer their own financing options, which could include higher interest rates that benefit the dealership through increased compensation. However, it's also possible for dealerships, especially when dealing with new cars, to offer promotional financing with lower interest rates than those offered by banks or credit unions. It's important to compare the total costs and terms of any financing option and consider consulting with an attorney or financial advisor to understand the implications of the financing agreement.