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 Indiana, when financing a car purchase, you have the option to either secure a loan directly from 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 a higher interest rate than what a bank might offer and potentially receive the difference as compensation. However, it's also possible that a dealership, especially when selling new cars, may offer promotional financing with lower interest rates than those available from 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.