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 Missouri, 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'll know the loan amount and interest rate in advance. This can provide leverage when negotiating the price of the car and can simplify the buying process. On the other hand, dealerships often offer financing options through their own network of lenders. While this can be convenient, it's important to be aware that dealerships may mark up the interest rate above what the lender charges to compensate themselves. This means you might end up paying a higher interest rate than you would with a bank or credit union. However, dealerships sometimes offer promotional financing with lower interest rates, especially for new cars, which can be competitive or even better than those offered by traditional financial institutions. It's crucial to compare the total costs and terms of any financing offer and consider negotiating the terms to ensure you are getting the best possible deal.