If you’re in the market for a new automobile, maybe you think the easiest way to get your dream car financed is to obtain dealer financing at the time you buy the car. In a sense, that’s true – as long as you don’t mind spending more time and money than necessary just to make things “easy.”
Getting an auto loan through your credit union does require a little more effort on your part. You apply for the loan before you go shopping and get pre-approved for a specific maximum. Then you can use that pre-approval almost like cash when you go shopping. It may seem strange if you’ve never done it before, but car dealers are very experienced in BYOF (bring your own financing) buyers.
Your rewards for that extra effort are significant.
Better rate: On average new auto loan rates at credit unions are nearly two percentage points lowers than banks. And they’re about 2.25 percentage points lower on used car financing. What does that translate to in dollars and cents?
Let’s suppose you’re financing $30,000 for 60 months and your credit union offers you a rate of 3.15%. That would make your monthly payment $541 and your total interest paid over the life of the loan $2,464. However, if the bank across town offers the same loan at 5.15%, your monthly payment will be $568 and your total interest paid will be $4,092. That’s a significant difference.
A more affordable car: When you’re pre-approved for an auto loan from your credit union, you can rest assured that you’ve been approved for a loan you can actually afford. Remember, your credit union is on your side. That means that before you ever get to the dealer, you know exactly how much you can spend and exactly how much your maximum payment will be.
Unfortunately, car dealers don’t always have your best interests in mind. They’ll try to get you to spend as much as they can because, of course, that will generate the maximum amount of income for them. You can easily end up with more car and bigger payments than you can really afford.
Less time at the dealer: If you’ve ever purchased a car from a dealer, you know that a significant portion of your time at the dealership is spent with the so-called finance manager negotiating terms of the deal. If you’re pre-approved for an auto loan at your credit union, you can skip this entire torturous process. Credit union financing puts you in charge.