Head to head
Our view: a broker searches several lenders for the lowest APR you qualify for, while dealer finance is the one deal in front of you. Comparing both on APR and the total amount payable is the only way to know which is cheaper.
Worked example
A £20,000 car at the dealer's 9.9% APR over 48 months totals about £24,108 on HP. If a broker searches the market and finds 8.9%, the total falls to roughly £23,688, which saves about £420 in interest on the same car. But if the dealer is running a genuine 0% manufacturer deal, the total drops to £20,000 flat, beating that 8.9% broker deal by roughly £3,690. The only way to know which route wins for you is to compare every offer on APR and total.
A broker compares several lenders to find the lowest APR you qualify for, while dealer finance is the single deal at the forecourt, so the cheaper one depends on the APR each offers. The comparison table and worked example below line both routes up on APR and the total amount payable.
Neither is automatically cheaper. A broker can beat the dealer by searching the market, but a manufacturer 0% deal at the dealer can beat any broker. The rest of the page covers who each route suits, how broker commission works, and the three-quote rule.
Broker finance vs dealer finance at a glance
A broker searches multiple lenders for the lowest APR you can get; dealer finance is one deal, sorted on the spot. The cheaper route depends on the APR.
A broker is useful when you want one application to reach several lenders. That helps with bad credit or a thin file, where applying direct to each lender would leave multiple hard searches on your credit record. The dealer is useful when there's a genuine manufacturer deal that no broker can access. Both must be FCA-authorised, and both should show you the APR clearly before you sign.
The key structural difference is choice. A broker takes your details and shops them across a panel of lenders, returning the APR each will offer you; you see a range of options from one application. Dealer finance is a single lender's offer (the finance company behind that brand), and the APR is whatever that one provider quotes. That's why a broker usually wins on market rate, and a dealer usually wins when a manufacturer is subsidising the rate to sell cars.
| Broker finance | Dealer finance | |
|---|---|---|
| Choice of lenders | Several, searched for you | One deal offered |
| Rate | Best of the market | Varies, sometimes 0% |
| Convenience | Apply through the broker | Sorted at the dealer |
| Best for credit choice | Bad credit, more options | Strong manufacturer deals |
| Fees / commission | May charge a fee or earn commission | Commission, sometimes disclosed |
| 0% deals? | Rare | Yes, via manufacturer |
| Best for | Shopping the whole market | 0%/manufacturer offers |
Worked example: broker vs dealer finance
On a £20,000 car, a broker that finds 8.9% beats a dealer at 9.9% by about £420 in interest, but a dealer 0% deal beats them both.
Get a broker quote and the dealer's deal, then line them up on rate and total. A broker may charge a fee or earn commission, so check the all-in cost. A 'free' broker is paid by the lender, which doesn't necessarily make the APR worse, but it's worth knowing who's paying whom. Turn each quote into a true rate on the APR and true-cost calculator, and check the loan benchmark on the car loan calculator.
Worked example
Who each option suits
Use a broker to search the whole market or with weaker credit; take dealer finance for a strong manufacturer or 0% deal.
- Broker finance if: you want one application to reach several lenders, have bad credit or a thin file, or want the lowest market APR without applying everywhere yourself.
- Dealer finance if: there's a genuine 0% or manufacturer-subsidised deal, or the convenience of arranging it on the spot suits you and the rate is competitive.
- Always get three quotes (broker, dealer and your own bank loan) so you have a real benchmark and a fallback, and compare all three on the total amount payable.
Pros and cons: broker vs dealer finance
A broker wins on market search and bad-credit options; dealer finance wins on convenience and manufacturer deals.
| Pros | Cons | |
|---|---|---|
| Broker finance | Searches several lenders, one application, strong for weaker credit | May charge a fee or earn commission, no manufacturer 0% access, less convenient |
| Dealer finance | Convenient, possible 0% or manufacturer subsidy, arranged on the spot | One lender's rate, may block cash discount, can be higher APR than broker |
How broker commissions work — and what they mean for your rate
Most car-finance brokers earn commission from the lender, not from you. That doesn't necessarily make the APR worse, but it's worth knowing who's paying whom.
The typical broker model is 'free to the customer': you don't pay a fee, and the broker earns a commission from whichever lender you go with. That commission is built into the rate the lender offers, so it's part of the APR you're quoted rather than an extra cost on top. The broker's incentive is to find you a deal you'll accept, because that's when they get paid, which aligns their interest with yours on getting you approved.
Where this can distort is on rate. A broker may favour lenders that pay higher commission, or present the deal that's most profitable for them rather than the absolute cheapest for you. This is the conduct the FCA's motor-finance commission work has been scrutinising: undisclosed commission on discretionary discount models led to customers paying more than they should have. Since 28 January 2021, the DCA (discretionary commission arrangement) ban means brokers can no longer earn more by charging you a higher rate, which has cleaned up the worst of the distortion.
The defensive move is simple: get the broker's best quote, then benchmark it against a bank loan you arrange yourself and the dealer's offer. If the broker's quote has the lowest total amount payable of the three, take it. The commission doesn't matter then, because you're paying the lowest cost. If the bank loan is cheaper, use that. Read more about the commission redress position in our motor finance claims pages.
The three-quote rule
Never take car finance on the first quote you see. Gather three (broker, dealer, bank) and let the numbers decide.
Car finance APRs vary between lenders by several percentage points for the same buyer. The only way to know you're getting a fair rate is to compare multiple quotes on the same scale (the total amount payable), and the cleanest way to do that is to gather three: a broker quote (which searches multiple lenders in one go), the dealer's offer, and a bank loan you arrange yourself.
Each route has a sweet spot. The broker is strongest when your credit is thinner or you want the widest search. The dealer is strongest when there's a manufacturer 0% or subsidised deal. The bank loan is strongest when your credit is prime and you want ownership from day one with no mileage limits. Gathering all three takes an afternoon and can save you hundreds or thousands over the term. On balance, it's the most useful thing you can do before signing.
Use soft searches where possible. A soft search (most banks and comparison sites offer them) doesn't affect your credit file, so you can shop around without penalty. A full application leaves a hard search, so avoid making several of those. Pick one broker, one bank and one dealer, soft-search the first two, and only allow a hard search once you've chosen.
- Soft-search a bank loan or comparison site for your benchmark APR.
- Get one broker quote via a soft search, reaching multiple lenders at once.
- Get the dealer's finance offer in writing, including any 0% or subsidy.
- Compare all three on the total amount payable, not the monthly.
- Sign whichever is cheapest overall, with the product structure that suits you.
Work out your own numbers
Compare every offer (broker, dealer and your own bank loan) on APR and the total amount payable, using the three-quote rule.
Check each quote on the APR and true-cost calculator, benchmark a car loan you arrange yourself, and read how dealer finance compares with a bank loan. See it all on the car finance calculator. Our view: gather all three quotes (broker, dealer and a bank loan) before you commit, and let the numbers decide rather than the convenience. An afternoon of comparing can save you hundreds or thousands over the term.
Frequently asked
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