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 Maryland, when financing a car purchase, consumers have the option to either secure a loan 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 leverage in negotiations and help you budget accordingly. On the other hand, dealer-arranged financing may offer convenience and sometimes promotional financing rates, especially for new cars, which could be lower than those offered by banks. However, dealerships may also mark up the interest rate above what you might qualify for with a bank to earn additional compensation. It's important to compare the total costs and terms of any financing offer and consider negotiating the terms of dealer financing just as you would the price of the vehicle. Maryland law requires full disclosure of all financing terms, and consumers should carefully review these terms before agreeing to any financing arrangement.