What is Direct and Indirect Finance?

April 28th, 2021 by
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Between choosing a trim level and setting a budget, there’s a lot to consider when buying a new-to-you car. One of the most important decisions you’ll make is the financing method, so you’ll want to be familiar with the key difference between direct vs. indirect finance before you get started. So, what is direct and indirect finance? In the guide below from the Cactus Jack's Auto finance center, we’ll look at how this choice can have a big impact on your auto financing package in Mesa.

Direct vs. Indirect Finance: What’s the Difference? 

What is direct and indirect finance, and what difference do they make to the auto financing process? Here’s what you need to know:

  • Direct financing occurs when you finance in-house with your dealership via a financial intermediary like a lender, bank, or credit union. You and your dealership will agree on a customized loan or interest rate before you start shopping, so you’ll know exactly how much you can spend on your new car.
  • Indirect finance occurs when you secure a loan package through a third-party commercial or private lender, investor, or government source. If you go this route, you’ll typically complete the shopping process before applying for a loan.

Advantages & Disadvantages

Both direct and indirect financing methods have unique advantages, and it may take a little research to find out which path will serve your needs best. To get started, compare the key benefits of direct vs. indirect auto finance methods below:

Advantages of Direct Financing

  • Advantages – Direct finance offers greater flexibility and customization. You work directly with your lender and have full control over the process. Plus, there are no restrictions as to how many loans you apply for, or whether you apply before or after shopping for your vehicle.
  • Disadvantages –  While you’re able to apply more broadly, the direct finance process is more time-consuming and may require more research.

Advantages of Indirect Financing

  • Advantages – Even though indirect financing may involve more parties than direct financing, working with a team may speed up the process. You can search for multiple loan opportunities at once, and your lender or dealer can run your credit multiple times each day.
  • Disadvantages – The speed and convenience of indirect financing may cost you more, so consider whether you’re willing to budget for the added service.

Explore Auto Financing Methods with Cactus Jack's Auto

If you’re still weighing the pros and cons of direct vs. indirect finance, the auto finance experts at Cactus Jack's Auto are happy to answer your car-buying questions. Our goal is to find a financial solution that enables you to drive home to Glendale in the vehicle of your dreams! Contact a Cactus Jack's Auto location near you Glendale to learn more about auto financing today.

 

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