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 Kansas, 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 will 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, the dealer may negotiate a higher interest rate than what the bank offers and keep the difference as compensation. This is known as a 'dealer markup.' While this might result in a higher cost of borrowing for the consumer, dealerships sometimes offer promotional financing with lower interest rates, especially for new cars, which could be more competitive than bank rates. It's important to compare the total costs and terms of any financing offer and consider the long-term financial implications before making a decision.