Dealer vs Bank Financing: Which Saves More?
Compare the dealer's financing offer against your bank or credit union pre-approval. Includes the 0% financing vs cash rebate trade-off that most buyers miss.
Financing Details
Enter the dealer's offered rate and your bank or credit union pre-approval rate. All figures in Canadian dollars.
Enter the dealer rate and your bank rate to see which financing option saves you more money.
| Dealer | Bank | |
|---|---|---|
| Interest Rate | ||
| Monthly Payment | ||
| Total Interest | ||
| Total Cost |
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Straight Answers
It depends entirely on the rates. Dealer financing can be competitive, especially when manufacturers offer promotional rates like 0% or 1.99%. That said, dealers sometimes mark up the buy rate from the lender to earn a commission. Always get a pre-approval from your bank or credit union first so you have a baseline to compare against.
Manufacturer 0% financing is typically offered instead of a cash rebate. The rebate can be worth $1,000 to $10,000 or more. If you take 0% financing, you forfeit the rebate. In many cases, taking the rebate and financing at a low bank rate saves you more money than the 0% offer. Always run the numbers both ways.
Canadian auto loans use semi-annual compounding, unlike US loans which use monthly compounding. The effective monthly rate is calculated by taking the annual rate, dividing by 2, adding 1, raising to the power of 1/6, and subtracting 1. This calculator uses the correct Canadian compounding method.
Yes. A pre-approval from your bank or credit union gives you a guaranteed rate to compare against any dealer offer. It protects you from rate markup, where the dealer quotes a higher rate than you qualify for and keeps the difference as profit. Having a pre-approval is one of the strongest negotiating tools you can bring to a dealership.
Sometimes. Dealers have access to multiple lenders and manufacturer subvented rates not available directly to buyers. If a manufacturer is running a promotional rate on a specific model, the dealer rate may be significantly lower than any bank rate. If no promotional rate applies, the dealer may mark up the rate above what you could get independently.
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A Buyer’s Brief negotiates the dealer rate against your bank pre-approval.