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 Utah, when financing a car purchase, consumers have the option to either secure a loan directly from a financial institution like 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 have a predetermined loan amount and interest rate before approaching a dealership. This can provide a clear budget and potentially more negotiating power at the dealership. On the other hand, dealer-arranged financing involves the dealership acting as an intermediary between the buyer and potential lenders. Dealerships may negotiate higher interest rates than those offered by banks or credit unions and may receive a portion of the interest as compensation. However, it's also possible for dealerships, especially when dealing with new cars, to offer promotional financing with lower interest rates than those available from traditional lenders. It's important for consumers to compare the total costs and terms of any financing options and consider any promotions or incentives offered by dealerships when making a decision.