Dealer Financing vs. Bank Loan: What’s the Better Deal?

“0% financing available—no interest for 36 months!”

If you’ve ever shopped for commercial trucks, excavators, farm equipment, or industrial gear, you’ve likely seen manufacturer financing offers that sound too good to pass up.

But here’s the question:

Is that “free” financing actually the best deal? Or could an independent loan save you more overall—even with interest?

The truth is, both paths can be smart—depending on your priorities, cash flow, and the fine print.

This article breaks down:

• How manufacturer/dealer financing works
• Why 0% offers aren’t always free
• When independent bank or broker loans win out
• How to calculate total cost—not just rate
• A real-world case study to guide your decision

What Is Dealer or Manufacturer Financing?

Many OEMs (original equipment manufacturers) offer in-house financing through a captive lending arm—examples include:

• John Deere Financial
• CAT Financial
• Freightliner Finance
• Kubota Credit Canada
• Thermo King Financial

These offers are typically used to move inventory, promote new models, or boost dealer sales, and may include:

• 0% or low-interest rates
• Deferred payments
• Special lease packages

What’s the Catch with 0% Financing?

While 0% offers can be great in some cases, here’s what to watch for:

🔹 Higher Equipment Price

Often, the 0% promo only applies to MSRP (full list price).
If you used independent financing instead, you might negotiate $5K–$15K off that same unit.

🔹 Fewer Customizations or Add-Ons

Dealer financing may exclude upgrades or attachments, or limit which models are eligible.

🔹 Strict Terms & Conditions

Some offers require:

• Shorter loan terms (24–36 months)
• Large upfront deposits
• Perfect credit
• No early payoff without penalty

🔹 Less Flexibility

You may be locked into the dealer’s program, which doesn’t allow bundling soft costs (delivery, install, insurance) into the loan.

When Independent Financing Is the Smarter Move

Brokers like Mehmi can help you secure equipment loans from 30+ lenders across Canada. That means:

• You can negotiate the lowest possible equipment price (not MSRP)
• Add extras like insurance, delivery, and licensing into the same loan
• Choose from a range of lenders (including low-doc options)
• Secure longer terms or seasonal structures
• Get funding for used or private-sale gear (not just new dealer models)

Example: 0% Dealer Offer vs. Independent Loan Comparison

Result: Dealer wins this round if you plan to pay it off quickly and don’t need extras or flexibility.

But if you want lower monthly payments, longer terms, or bundled add-ons, independent financing may still come out ahead in real-world usability.

Case Study: Comparing Promo vs. Negotiated Deal

Business: Mid-size excavation company in southern Ontario
Need: New tracked skid steer for expanding job site contracts
Options:

• Dealer option: $89,000 at 0% for 36 months
• Mehmi-facilitated loan: Negotiated purchase at $81,000, financed over 60 months at 7.95%

What They Did:

• Ran a 5-year cost model
• Saw the dealer loan had lower interest, but the shorter term created cash strain
• Opted for the Mehmi deal: more manageable payments and upfront savings
• Used the $8,000 price difference to buy a hydraulic attachment
  Result: More functionality, better cash flow, smoother growth path.

When Dealer Financing Makes Sense

✅ You’re getting a true 0% offer with no hidden markup
✅ You have strong credit and qualify for the full promo
✅ You plan to pay it off quickly and don’t need extras
✅ You’re buying new from an authorized dealer with no plans for early payoff

When Independent Financing Is Better

✅ You want to negotiate the lowest equipment price
✅ You need to finance used or private-sale units
✅ You want longer terms, seasonal payments, or bundled costs
✅ You need more flexible underwriting or tax-based structuring

Explore: Equipment Financing & Leasing Options

Final Word: Rate Isn’t Everything—Total Cost and Flexibility Matter

It’s easy to get blinded by a 0% headline—but smart financing means asking:

• What’s the real cost of the equipment?
• Will this strain my cash flow month-to-month?
• Am I giving up flexibility I might need later?
• Could I use that price difference to add functionality or preserve cash?

At Mehmi, we’ll help you compare both options side-by-side—even if the dealer promo turns out to be the right call.

We’re not here to push loans—we’re here to help you finance the right way for your business.

Want help comparing dealer offers to independent financing?
Talk to a credit analyst or get pre-approved and negotiate your next equipment deal with full confidence.

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