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 Illinois, 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 you choose to get preapproved for a loan from a bank or credit union, you will know the loan amount and interest rate in advance. On the other hand, with dealer-arranged financing, the dealership may negotiate the loan terms on your behalf with its network of lenders. It's important to note that dealerships might mark up the interest rate above what the lender charges to compensate themselves, which could result in a higher rate for the buyer compared to a bank loan. 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 advisable to compare the total costs and terms of any financing offers and consider consulting with an attorney or financial advisor to understand the implications of each option.