When shopping for a new car, your first stop for an auto loan should be your credit union. Though many people start their process on the dealer’s lot, you’ll typically enjoy a lower rate, a simpler loan application process and other benefits by choosing to finance your car with a credit union auto loan. Your credit union is here to help you move ahead financially!
In fact, more and more people are choosing to finance their cars directly through a credit union. Auto loans actually make up more than a third of all the active loans across 5,600 credit unions in the United States. Let’s take a look at the differences in the auto loan process at a car dealership versus a credit union.
Financing through a car dealership
When you visit a car dealer’s lot with the intention of purchasing a car, the dealer will likely ask you how much you’re willing to spend on your vehicle of choice. You may have already worked out your numbers or you may just have a vague idea of how much you can realistically afford. Either way, the dealer will probably try persuading you to push your self-imposed limits to the max or even to go over your ceiling price. This could leave you with a monthly auto loan payment you can’t realistically afford.
But, if you’re financing your car through the dealer, that’s only the beginning. Once you’ve chosen the car you’d like to buy, you’ll need to submit a complicated auto loan application form, which the dealer will send to the finance companies it partners with. The dealer will then share the lenders’ offers with you and ask you to make your choice.
However, in most cases, the dealer is only the middleman. This means they are going to present your options in a way that most benefits them–and not you. Thanks to this practice, even a good offer will be presented as higher than it actually is.
For example, say your dealer contacts three lenders: Lender A, Lender B and Lender C. Lender A agrees to offer you a 5% Annual Percentage Rate (APR), Lender B offers a 6% APR, and Lender C offers a 7% APR. But the lender will not automatically present you with Lender A’s offer. Instead, they will first determine which lender would afford them the greatest profit.
The rates presented by the above lenders are known as the “buy rates,” or the lowest possible rate the lenders will grant the borrower. Each lender could present a different option to the dealer. For example, Lender A might offer the dealer a flat fee for each new loan the dealer is able to get at the buy rate based on a tier system, with more profit granted for each new tier of a car price. Lender B, on the other hand, may allow the dealer to increase the buy rate by 3% to a new “contract rate.” The dealer then pockets the difference as his own profit. Lender C may allow the dealer to offer a contract rate at 2% higher than the buy rate.
In the above scenarios, it isn’t hard to picture the dealer pushing you to accept an offer from Lender B or Lender C at the new contract rate of 9%. If you complain that this rate is too high, the dealer may then suddenly “remember” that Lender B is willing to finance the loan at a 7% APR. In either case, it’s hard to know for sure if you’re being presented with the offer that’s truly in your best interest.
Financing through a credit union
Getting a credit union auto loan is a completely different experience. Why? Because we exist to serve your best interest.
When you talk to Partner Colorado with the intention of taking out an auto loan, you’ll be dealing with people who know who you are and what your financial reality is like. No one will try to push you into a loan you can’t afford. We want to make sure your credit union auto loan fits your budget.
The process of applying for a credit union auto loan is simple, quick, and easy. You can even apply for an auto loan online or over the phone. Also, as a member of Partner Colorado, you already have a head start on getting that pre-approval before you even go car shopping. That way you can negotiate like a cash buyer.
One of the biggest advantages you’ll have when financing a credit union auto loan is a lower Annual Percentage Rate (APR). Because you’re working directly with the lender, you’ll only hear the actual rate we offer instead of a marked-up rate the car dealer presents to you.
Another key advantage you’ll enjoy from a credit union auto loan is a more relaxed setting when determining how much you can afford to pay each month toward your new car. There’s no rush and no pressure when you’re talking to us and working out your budget. In contrast, when you’re standing in the dealer’s lot surrounded by cars you wish you could afford, you’re far more likely to make a decision you’ll later come to regret.
You can use our free, online auto loan calculators to determine everything from your monthly car payment, to your target purchase price and more. As your credit union, we want to make sure you’re comfortable with your new auto loan payment before you even step onto a car lot.
If you’re in the market for an auto loan, make the first stop at your credit union. You’ll enjoy a lower rate and the friendly, professional service you’ve come to expect at Partner Colorado.