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What's the difference?

Car Loans vs. Car Financing | CarMax

Curious about the difference between car loans arranged directly with a lender, bank, or credit union and dealer-arranged auto financing?

Unless you’re buying with cash, you’ll need financing with a lender or finance source. When you finance, you’ll enter into a contract that includes the finance terms and pledges the car as collateral. You can get financing through direct interaction with a lender, bank, or credit union, or through dealer-arranged finance options.

Each method has its advantages, and each should be considered before shopping for a car.

Some customers like working directly with a lender. They feel this direct interaction gives them more control when visiting a dealer, since they have their financing in hand and can eliminate the hassles of negotiating finance terms.

Others prefer the speed and convenience of dealer-arranged financing. Dealers are generally equipped to provide finance options and quick paperwork completion to facilitate the sale.

At CarMax, you can get both: the competitive finance options found in the direct-to-consumer finance process — plus the speed and convenience found in the dealer-arranged finance model.

And at CarMax, used car financing is all upfront and transparent. There are no hidden numbers or pricing games like you might find at traditional dealerships. We have relationships with industry-leading finance sources that make credit offers to customers across the credit spectrum.

Our stores put you in the driver’s seat, each step of the way. This includes having control over the car financing process.

The car financing process

Car Loans vs. Car Financing: Process | CarMax

Traditional dealerships have been known to play the numbers game when talk turns to used car financing and car loans. There’s not much transparency about your financing terms. And it’s up to you to negotiate financing terms with the sales team, who is looking out for the dealership’s best interests.

Financing works differently at CarMax. At our stores, the process is designed to be transparent and hassle-free. We don’t haggle over financing, and we don’t negotiate our financing offers.

Three reasons to finance at CarMax

Financing just means borrowing money to make a purchase and entering into a contract to repay this amount over time. Whether you’re a seasoned car buyer or you’re financing a car for the first-time, there are reasons why it can make sense to choose CarMax when you’re financing your vehicle purchase.

1. The process is transparent

Our customers like the fact that when it’s time to consider financing, the offers come directly from our finance sources, usually within minutes of submitting an application. And when the offers come in, you and your sales consultant will see them at the same time. You may choose from any of the available offers.

CarMax’s finance sources include CarMax Auto Finance and a number of industry-leading finance sources. These relationships help to ensure a broad set of options.

2. You can bring your own financing

The above is an option if you decide not to bring your own financing when you shop at our stores. Bringing your own financing is welcome at CarMax!

While we’re confident about the competitiveness of our offers, you’re also welcome to replace ours with an offer from another finance source within three days of your purchase — at no cost.

3. Our sales consultants are paid the same, no matter how you buy

CarMax sales consultants aren’t paid to steer customers toward one financing option over another. They get a flat commission based on the sale of the vehicle, regardless of how or if it’s financed at CarMax. This lets them focus on finding the right car for you.

How your financing offers are determined

At CarMax, all finance offers are based on four factors:

  • Your application information
  • Your personal credit history
  • The vehicle you want to buy (its age, mileage, and price)
  • Your down payment amount

When your personal credit history reflects good credit, you have a better chance of getting approved and getting more favorable financing terms. Click here to learn more about credit scores, the factors that can affect your personal credit history, and how to obtain a copy of your credit report.

What to bring with you to CarMax

To help make the process as smooth as possible, bring the proper paperwork when you visit us. To complete your transaction, you may be required to provide any or all of the following:

More about financing at CarMax

If you want to know about used car down payments, know that at CarMax, making even a small down payment like $100 makes a difference. And your down payment goes directly toward reducing the amount you’ll need to finance. You can learn more about making a down payment by reading our Why Your Down Payment Matters article.

For more info about financing a car purchase at CarMax, check out these helpful articles.

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