Head to head
Broker Finance vs Dealer Finance: Which Is Cheaper?
Go through a finance broker or take the dealer's deal — compared on rate and choice.
A broker searches several lenders to find your best rate, while dealer finance is the deal in front of you — comparing both on APR is the only way to know which is cheaper.
A broker compares several lenders to find your best rate, while dealer finance is the single deal at the forecourt — so the cheaper one depends on the APR each offers. A broker shops around; a dealer offers one deal.
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.
Broker finance vs dealer finance at a glance
A broker searches multiple lenders for your best rate; 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 — handy 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 best rate 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 rate 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 £665 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 rate 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 best market rate 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 — which doesn't necessarily make the rate 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 not an extra cost on top — it's part of the APR you're quoted. 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 exactly 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. Post-January 2024, 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 rate is the lowest of the three on the total amount payable, take it — the commission doesn't matter 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 is a market like any other, and rates 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 — it's the single highest-leverage 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 hard-search when 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 on APR and total cost — broker, dealer and your own bank loan — 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. The smart move is to gather all three quotes before you commit — broker, dealer, and a bank loan — and let the numbers, not the convenience, decide. An afternoon of comparing can save you hundreds or thousands over the term.
Frequently asked
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What does a car finance broker do?
Is a broker better for bad credit?
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Are car finance brokers regulated?
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