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 Maine, when purchasing a car and considering financing options, you can either obtain a preapproved loan from a bank or credit union or opt for dealer-arranged financing. With a preapproved loan, you'll 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 might offer convenience, as dealerships often have relationships with multiple lenders and may facilitate the financing process. However, dealerships may also mark up the interest rate above what the lender charges to compensate themselves, potentially leading to higher costs for the buyer. Conversely, dealerships sometimes offer promotional financing with lower interest rates than banks, particularly for new cars, as an incentive to purchase. It's important to compare the total costs and terms of any financing offer and consider negotiating the terms to ensure the best possible deal.