If you’re familiar with online banking products, you’re probably very aware of Ally Bank’s presence in the online banking market.
But contrary to what it may seem, Ally isn’t a direct-to-consumer auto lender. That means you can’t find out whether or not you prequalify for an Ally Bank auto loan unless you go through a dealership. In 2016, Ally Auto served 18,000 auto dealerships and over 4 million auto dealership customers.
The thing is, it’s never a good idea to walk into a dealership before you’ve shopped around to get financing offers from multiple lenders. But with that being said, you might find yourself looking at a financing offer from Ally through a dealership and want to better understand how it works and what some alternatives might be.
In this post, we’ll take a look at the Ally Bank auto loan to let you know what steps are required to borrow and our take on the entire process. We’ll also cover rates and terms of Ally auto financing because we found them to be lacking transparency.
Who Ally Bank auto loan financing is best for
We don’t recommend that anyone chooses an auto loan through a dealership unless you get a ridiculously good deal compared to other offers.
The far better move is to first shop around for interest rates on auto loans with multiple lenders. Then go to the dealership with financing already secured. This way you’ve had time to get preapproved for the most affordable financing you can get, and you won’t fall victim to a subprime auto loan.
When reviewing a dealership auto loan, compare the interest rate, monthly payment, and total costs to other loans to make sure it’s truly a better agreement overall.
Check out this post for an in-depth guide on how to borrow money before car shopping.
Here’s a summary of the steps you should take:
- Improve your score. Work on your credit score health since a higher credit score is what will get you the best loan offers.
- Get preapproved. If you’re worried that shopping for several loans will damage your credit score, you can breathe a sigh of relief. Having your credit pulled by several lenders within a 14- to 45-day period can count as a single inquiry and has a limited impact on your score.
- Take your preapproval with you when car shopping. You can make well-informed buying decisions with a preapproval in hand.
How Ally Bank auto financing works
Ally Bank is an indirect auto lender. An indirect auto lender is one that offers loans through dealerships. You can’t call up Ally Bank directly to get auto loan rate estimates.
Instead, here’s how it works:
- Step 1: You go to a dealership that has a relationship with Ally Bank.
- Step 2: You choose a car you want to buy.
- Step 3: The dealership performs a credit review.
- Step 4: The dealership crunches numbers and comes up with loan offers you qualify for based on your credit and the car you’re buying.
- Step 5: You choose between offers, which can include an offer from Ally Bank.
One thing to be highly vigilant of with any indirect auto lender is that they may set a base interest rate and allow the dealership to tack on an additional markup on top of that rate. The interest rate markup can be revenue for the dealership and is an incentive to give you a more expensive loan.
Ultimately, it’s the dealership’s prerogative to make the most money possible regardless of what it costs you. To avoid getting finessed into a bad deal, it’s imperative that you search for auto loans from many lenders before car shopping at a dealership.
Ally Bank auto financing products
Ally Bank has four auto financing options:
Buying. According to Ally Bank, their auto loans have flexible terms. Auto loans come with online account management, auto-payments, and speciality financing for accessibility needs.
Leasing. There are lease financing options as well. A lease is kind of like renting a car for a certain time frame. You may have a limited number of miles you can drive on your lease, and you may be responsible for car repairs. Leasing cars long term can be more expensive than buying. A situation where a lease may make sense is if you want to drive new cars every few years.
Otherwise, you’re likely better off saving to buy a car in cash or financing to own it outright. Learn what you need to know before leasing a car here.
Ally Buyer’s Choice. Ally Bank offers a middle ground option between leasing and buying called Ally Buyer’s Choice. With the Ally Buyer’s Choice program, you make regular payments on an auto loan until the 48th month. At that point, you can decide to sell back the car to Ally Bank, or you can continue making regularly scheduled payments on the car.
Ally Balloon Advantage. Balloon financing is when you have smaller monthly payments and a larger lump-sum payment at the end of the contract. The benefit of a balloon loan is that you can have payments that are lower than a regular term loan. The drawback is obviously the large payment you’ll have to come up with down the road. Learn more about Ally Balloon Advantage loans here.
What we like about Ally Bank auto financing
The educational resources and account management tools. Ally Bank has an online and mobile app that can be convenient for account management. Ally Bank offers some articles on their website that can teach inexperienced car buyers what they need to know about auto loans.
What we don’t like about the Ally Bank auto loan
Transparency is lacking. Since Ally Bank is primarily an indirect auto lender, there’s hardly any information available online or through Ally Bank customer service about fees, terms, or interest rates. There are no details on what type of cars (make or age) that qualify for financing.
Ally Bank points you in the direction of dealerships you can visit to see what loans you qualify for. The dealerships are pretty much the middleman.
In comparison, some lenders will give you more insight on auto loan products. You can also get preapproved for these products before ever stepping foot on the car lot. We’ll give you examples in the next section.
Alternative auto loans
You should always shop around to compare rates before you head to a dealership. The dealer’s financing office may be able to beat your rate from another lender — but they won’t do that unless you’ve got an actual rate for them to see.
Use MagnifyMoney’s auto loan comparison tool to find great offers in your area.
Here are some lenders that will let you shop for loans before going to the dealership:
U.S. Bank – Rates start at 3.12% APR
The maximum you can borrow is $100,000. You can get a 0.50% discount off of your interest rate if you buy an EPA-Certified SmartWay vehicle or sign up for automatic payments.
U.S. Bank lets you get preapproved online to check for rates and terms. The preapproval is free but does require a hard inquiry credit check. Remember, if you shop for auto loan rates with several lenders within a short time frame, it can count as a single credit pull.
LightStream – Rates start at 2.49% APR
You can borrow from $5,000 to $100,000. If you sign up for automatic payments, you can get a 0.50% rate discount. The process of getting a loan is simple. You apply online, accept your loan terms, and receive your funds to make the car purchase.
Your loan can get approved and funded the same day if your application process is complete before 2:30 p.m. ET on a bank business day.
Capital One – Rates start at 3.24% APR
Capital One lets you borrow between $4,000 and $40,000 for new and used cars. The car has to be 12 years old or older with less than 120,000 miles on it.
You can prequalify for rates on the Capital One website without a hard inquiry. Once prequalified, you can search for cars through Capital One partners and personalize your loan terms.