Buying a car is often a process we endure more than anything. There’s a lot to consider even before haggling out the details of a loan. But once it comes time, far too often the interest rate is where people settle. They either get pressured to go through the dealer, or they head to their primary bank because it’s convenient. Your best option? Going to a Credit Union.
Whether you’re trying to refinance your auto loan or get a new one, you’ll get a lower interest rate by going through your Credit Union. Period.
As of September 2019, here are the national average interest rates between Credit Unions and Banks.*
*Data Pulled from the National Credit Union Administration – September 2019
Credit Unions beat banks every time.
If you’ve ever been roped into an auto loan that you’re not happy with, then absolutely you should talk to a Credit Union about refinancing. They’ll be able to give you a much better deal.
How much can you save by going through a Credit Union?
Lets compare the rates for a 60 month loan on a $25,000 new vehicle. Let’s say we are offered a 3.63% rate from a Credit Union, and a 5.20% rate from a bank.
That’s only a difference of 1.57%, but it makes a big difference in the end. On a per-month basis here’s what payments would look like.
Credit Union: $456 per month.
Bank: $474 per month.
This difference of only $18 per month might not seem like a lot–but remember you’re making that extra payment over the course of 60 months.
$18 x 60 = $1,080. That’s a $1,080 premium you end up paying that you didn’t have to.
Don’t settle for a higher rate even if your credit isn’t stellar.
Most people settle for high auto loans because they either have zero credit, a short history, or bad credit. People are given a high rate and are told, “This is the best I can do for you.” And that’s that.
Credit Unions will go above and beyond what a normal lender will. They often look at a wider range of factors when making a decision and are more flexible about individual circumstances.
Consider refinancing an existing loan.
If you already have a loan through another lender, then consider talking to a Credit Union about refinancing.
Yes, most Credit Unions will be able to beat your lender’s rate, but they can do more for you too. Since it’s the Credit Unions job to serve its members, they’re easy to work with you if you need to lower your monthly payment or extend your payment plan.
Just remember because of the nature of loans, the sooner you refinance the more you’ll be able to save.
Why are Credit Union rates so much lower?
Credit Unions are not-for-profits that work in the interest of their members; not shareholders, not a bottom line, but their members.
There’s a lot of perks to being with a Credit Union, but auto loans are a category where they really shine.
The only hurdle is that you have to be a member of a Credit Union to take advantage–and it’s not difficult.
A credit union can walk you through their membership process if you go in to ask about a loan. Usually you just have to live in the same region the Credit Union operates in. Some Credit Unions are for specific fields, such as military personnel.
If you’re looking to get the best possible rate on your auto loan, or you want to refinance a current loan, go to a Credit Union. It’s the smartest option because you’ll get:
- Great rates
- Excellent refinancing options
- Flexible and personal service
Evan is a personal finance writer, content manager, and comedian based out of Los Angeles, CA. He’s covered credit cards, personal loans, new advances in fintech and more.