In-House Car Financing in Canada: Everything You Need to Know

It’s reader question time again. This time it’s a question we hear often, making it ideal for a blog topic. The question is ‘What is in-house financing and is it a good alternative to a car loan’.

Our car loan team takes it from here.

What is In-House Car Financing

For once, the term means what it says. In this case, financing is provided in-house by the dealership. Rather than using a third-party lender or lending partner, the dealership itself puts up the money for the car and you repay them directly.

In-house financing is also known as ‘buy here pay here’ financing and is common for used or cheaper cars.

Is In-House Financing a Good Alternative to a Car Loan?

In-house financing can be a good alternative to a car loan but it depends on your situation.

It's useful if you think you may not qualify for a standard car loan. If you have had issues with credit in the past or are building credit for the first time. Dealerships usually have lower qualification criteria so it can be an option.

It’s also convenient. It’s quick to arrange, doesn’t involve a ton of paperwork like a standard car loan and it’s the dealership that says yes or no.

If the dealership reports the payments to the credit bureaus, it can help build credit too.

In-house financing isn’t all good news though. There are some downsides.

It is usually more expensive than standard car loans. As the dealership is assuming all the risk, they will charge a higher interest rate in return. Just how much higher depends entirely on the dealership.

Contract limitations are also common with in-house financing. For example, you may not be able to settle the loan early or overpay. Some loans will allow overpayment or early settlement but will charge a fee.

Finally, not all dealerships will report your payments to the credit bureaus. While they aren’t obligated to do so, it’s helpful if they do as it will contribute to your credit score.

Car Loans as an Alternative

There are more hoops to jump through to get a car loan but you also have more options.

You should have more contract types, and more flexible loans that allow early settlement or overpayment and all loan payments will be reported to the credit bureaus.

You can often find much cheaper interest rates too!

If you think you’ll have difficulty qualifying for a car loan, you should contact us first. Our team of car loan specialists has access to a wide range of lenders willing to work with borrowers from all walks of life.

We bet we could find you a great deal on a car loan. Why not try us and let us see what we can do for you?

In-house financing can be fine and can offer decent rates but we bet we can do better!

If you're ready for a car loan in Southern Ontario, we'd love to help! simply fill in the form below to get started.