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 Dakota, when financing a car purchase, consumers have the option to either obtain a preapproved loan from a bank or credit union or to opt for dealer-arranged financing. With a preapproved loan, the buyer knows the loan amount and interest rate in advance. This can provide leverage in negotiating the price of the car and may offer more favorable terms since it is based on the buyer's creditworthiness and the financial institution's lending criteria. On the other hand, dealer-arranged financing may involve the dealer acting as an intermediary between the buyer and a lender. While this can sometimes lead to more convenient or competitive offers, especially for new cars, the dealer may also mark up the interest rate to gain additional compensation. It's important for consumers to compare the total costs and terms of any financing offer and to be aware that dealerships may have incentives to arrange financing that is more profitable for them. North Dakota consumers should also be mindful of state and federal laws that protect against discriminatory lending practices and require full disclosure of financing terms under the Truth in Lending Act (TILA).