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 North Carolina, when financing a car purchase, consumers have the option to either obtain a loan directly from a bank or credit union or to opt for dealer-arranged financing. If a buyer chooses to get preapproved for a loan from a bank or credit union, they will agree to a set loan amount and interest rate based on their creditworthiness. On the other hand, dealer-arranged financing involves the car dealership facilitating the loan process, often with a network of lenders they work with. Dealerships may negotiate a higher interest rate than what the buyer might qualify for with a bank, and the difference can serve as compensation to the dealership. However, it's also possible for dealerships to offer promotional financing deals, especially for new cars, which can sometimes result in lower interest rates than those offered by banks or credit unions. Buyers should compare the total costs and terms of any financing options and consider negotiating the terms of dealer-arranged financing to ensure the best possible deal.