Buying a car can be a thrilling experience. From the weekend test drives to negotiating a good price, securing the vehicle you want is exciting. However, auto loan shopping, credit checks, and comparing loan terms can be stressful, often making you question whether you’re really getting a good deal.
Credit unions remain one of the most popular financial institutions for auto loans despite stiff competition from banks, online lenders, and auto dealerships. While manufacturer-driven captive financing is dominant in the new car market, almost a quarter of used car purchases are financed by credit unions.
Benefits of Credit Union Auto Loans
According to a recent report, the worldwide market for new vehicles consisted of over 85 million units in 2020. This figure is expected to reach over 122 million by 2030.
Loan financing is a smart approach to purchasing a vehicle. It allows you to buy a car with more upgrades, cover the purchase in monthly installments and helps you build your credit score when you make timely payments.
Credit unions are a popular financing option for car buyers. They offer competitive rates and provide many other benefits, helping to make your purchase more affordable.
Competitive auto loan rates
Credit unions help you save money on your vehicle loan. According to the National Credit Union Association (NCUA), the average rate for credit union auto loans is significantly lower than most major banks.
The annual percentage rate (APR) for a 4-year used car from a credit union is 2.84% (2022), compared to 5.03% from a bank. Credit unions are also more competitive with new vehicles, offering 2.67% APR for a 4-year loan, compared to 4.60% from a bank.
Credit unions can offer these low interest rates because they are not-for-profit, member-owned institutions. Their primary focus is to provide affordable financial services to all members, regardless of their credit score or financial situation.
Unless you receive a zero-percent finance offer from a dealership or an incentivized auto rebate deal, a credit union may be your best option for a low auto loan rate. Long-term savings are one of the main reasons for credit union car loan growth in recent decades.
Although credit approval is still a critical part of the credit union car loan process, they are often more open to working with members with bad credit. Rather than focusing solely on your creditworthiness, credit unions consider other factors before making a loan decision, such as:
- Employment status
- Motor vehicle report
- Extenuating individual circumstances (e.g., involuntary unemployment)
- Recent financial standings
- Existing accounts with the credit union (e.g., current auto loan or credit card account)
Many credit unions offer financial advice and educational services to help members with financial management. Equipping loan applicants with financial management tools can help them meet loan eligibility requirements. However, rates are subject to a credit check, and members with excellent credit are more likely to secure the lowest rates.
Banks are for-profit organizations that must generate income for their investors. They often charge an origination or application fee to loanees, inflating the cost of a loan. Credit unions charge minimal add-on fees, resulting in a lower overall loan payment.
Simple loan application process
Credit unions offer several convenient options for auto loan applications. You can begin the process for auto loans using a simple online application.
Dealership sales and financing are convenient options for some consumers. Unfortunately, many of these organizations work with third-party financers, so their rates are typically higher than credit unions.
Tips for Securing Competitive Loan Rates
While credit unions offer more competitive rates than other financial institutions, there are several ways to secure the lowest possible rates:
Improve your credit score
Improving your credit score is one of the best ways to get competitive rates on an auto loan. Apply for a copy of your credit report from a consumer reporting agency and look for areas of improvement. Steps to improve your credit score quickly include:
- Making timely monthly payments on existing loans and bills
- Paying off overdue accounts
- Lowering your credit utilization ratio (reducing credit card transactions or increasing credit allowance)
- Avoiding hard inquiries on your credit score
- Consolidating debt
Choose the right vehicle
Choosing a vehicle within a reasonable price range is important to secure competitive interest rates. If you can afford a large down payment, you will likely get a lower interest rate from a lender since the risk of default is reduced. A lower outstanding balance also makes repayments more affordable.
If possible, make a 20% downpayment, ensuring a large chunk of the purchase price is covered upfront. If your ideal vehicle is out of your price range, consider searching for an older model. Set an exact budget and narrow down your car search.
Vehicle age is one of the leading causes of depreciation. A vehicle that is a year or two old is still a great deal because you are getting a newer vehicle for less money.
Use a cosigner
A cosigner assumes legal responsibility for monthly payments if you cannot. A cosigner means less risk to lenders, which may result in flexible terms and lower rates.
T&I Credit Union Auto Loans
T&I Credit Union is a leading auto loan provider dedicated to providing affordable financing for car buyers. We offer competitive rates and a host of member benefits, making the application and repayment process manageable and straightforward.
If you’re after a low-rate auto loan, we have a range of flexible loan periods for older and new models. Our current vehicle loan rates for new models (2015 to 2022) are:
- 60-month term at 1.99% APR
- 72-month term at 2.99% APR
- 84-month term at 3,75% APR
Current rates for older models (2014 and older) are:
- 60-month term at 2.99% APR
However, all rates are subject to a credit review and approval from a loan officer.
We offer loanees GAP insurance, protecting their investment in case of an accident. GAP protection is a special type of auto insurance. It helps you pay off your car loan if your vehicle is totaled or destroyed and you still owe more than the car’s depreciated value.
T&I Credit Union members benefit from online banking services. We allow users to set up an automated bill payment method. This repayment method is an excellent financial management tool. It helps you avoid falling behind on your auto loan and other bills.
Additional member services
We offer a range of other member services, making our auto loan offers even more attractive, such as:
- Mobile app (allowing you to transfer funds, check your auto loan balance, and perform other digital banking tasks)
- Debit and credit card accounts
- Ball paying services
- Electronic payments
- Self-service tools
- Loan calculators
- Consumer loan call center number (for questions or repayment issues)
We also provide seminars and educational services, helping members become more financially responsible and teaching them to keep a budget on track. This can help members save hundreds of dollars every month and reduce the risk of default.
Start the Loan Process Today
Whether you need a minimum loan to secure the car of your dreams or an 84-month term for affordable monthly payments, consider a loan from T&I Credit Union. We provide competitive rates and a variety of loan terms according to your credit score and financial situation.
Our goal is to provide quality financial services to all our members. We strive to offer affordable solutions, helping you get the lowest rate and the funds you need for a vehicle purchase.