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 New York, 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 can expedite the buying process. On the other hand, dealer-arranged financing involves the dealer acting as an intermediary between the buyer and potential lenders. Dealers may have the ability to offer competitive or even lower interest rates, especially for new cars, as part of promotional offers. However, it's important to note that dealers might also mark up the interest rate above what the lender charges to compensate themselves. This means that while the dealer-arranged financing might initially seem more convenient or attractive, it could result in a higher overall cost due to the interest rate markup. Consumers should carefully compare the terms and total costs of financing options and consider negotiating the terms of dealer financing just as they would the price of the vehicle.