Is it Better to Finance Through Toyota or the Bank? - Toyota Direct Blog (2024)

FAQs

Is it better to finance through Toyota or the bank? ›

Financing through our Toyota finance services center can offer several advantages, including: Competitive interest rates: Toyota Motor Credit Corporation (TMCC) offers competitive interest rates on car loans near you, which may be lower than rates offered by other lenders.

The bank may even offer incentives to financing with them if you do all your banking under their roof. When financing a car through a bank, you have the advantage of shopping around at various institutions in order to get a competitive deal or terms that best align with your budget and credit profile.

Direct financing allows you to shop around for the best deal and potentially avoid markups from dealerships. The process of direct auto financing involves prequalifying with multiple lenders, choosing a lender and applying, buying the car, and making payments.

Toyota Financial Services requires you to have a score of at least 610 to qualify for an auto loan. And to nab Toyota's 0.00% interest deal (if it's available), you must have a credit score of at least 690.

According to our research, AutoPay currently offers the best auto loan rate for new car purchases, with annual percentage rates (APR) as low as 4.67% for new vehicles. PenFed Credit Union, Auto Approve, Consumer's Credit Union, Auto Credit Express and iLending also offer some of the most competitive rates available.

Toyota auto financing will never charge a prepayment penalty if you decide to pay off your loan early. While most lenders will not assess a prepayment penalty, it's still a good idea to inquire about it before closing on your loan.

Disadvantages: The downside to the direct finance process is that it can take more time and you'll have to apply at multiple lenders to compare offers.

Less Liquidity: Lenders can't move in and out of these investments as easily as investors can normally buy and sell broadly syndicated loans (BSLs) and high yield bonds; however, lenders are typically compensated for this risk with the possibility of additional return – the so-called illiquidity premium.

Dealers make money off in-house financing because they mark up your offered rate. For example, if you could qualify for a loan at 7 percent through a bank, you may receive an offer of 9 percent through dealership financing.

The most favorable Toyota financing deals are often reserved for customers with the strongest credit. Here are the tiers of credit as it relates to car finance. Tier 1 – 720 and above, excellent credit. Tier 2 – 690-719, considered very good. Tier 3 – 670-689, considered good.

What credit score do you need to get 0% interest on a car? ›

Credit score: You might need a credit score of at least 740 to be considered for a 0% APR loan. The minimum credit score depends on the dealership and the car you're interested in purchasing.

Get on the road today

With a TFS finance or lease contract, you can start building your credit history. Just meet the following criteria: Credit History. A FICO score of 610 or above.

Dealers make money off in-house financing because they mark up your offered rate.

depreciate quickly. It isn't always wise to spend cash on something that loses value every day. If a truck costs 5% to finance and expanding your business will likely return 15% a year, the company will net 10% growth in revenue by choosing to finance instead of paying cash.

Yes, just like the price of the vehicle, the interest rate is negotiable. Dealers may not offer you the lowest rate that you qualify for.

Making a down payment on a car can save you money and increase your chances of getting a loan — and better loan terms — especially if you have less-than-perfect credit. If you don't need to buy a car right away, consider saving for a down payment before you start shopping around for a car loan.