Car Buying: Credit Union Financing vs. Dealer Financing

When they’re shopping for a new car, many people reflexively have their new purchase financed through the dealership. That “one-stop shopping” can be very convenient – and costly. Savvy shoppers know that it’s better to get pre-approved for an auto loan through their credit union. Why?

In broad terms, it comes down to this: When you get a loan through your credit union, the credit union is looking out for your best interests. On the other hand, the dealer is looking out for their best interests. They want to convince you to spend as much as they possibly can, whether you can really afford it or not.

When you’re pre-approved for an auto loan at your credit union, you know exactly how much you can spend and exactly what your maximum payment will be. There is no guesswork involved. As long as you shop within those parameters, you’re assured that there won’t be any surprises later.

When your credit union quotes you an interest rate, that’s the actual rate. What you may not realize is that when a dealer quotes you an interest rate, they often quote you a rate that’s higher than their lender quoted them. They then pocket the difference. The rate you get from your credit union is typically lower than the rate available through a dealer.

If your credit is less than stellar, you may be tempted to shop at one of those “buy here, pay here” dealerships. Those places will gouge you on interest rates and fees. Check with your credit union first to see if they have any options that meet your particular circumstances.

Loan pre-approval also makes for a significantly streamlined auto-buying experience. If you’ve ever financed through a dealer, you know you can spend literally hours in the “finance office” filling out loan applications, haggling over rates, debating how large of a payment you can actually afford, being cajoled into various expensive add-ons, etc. With your credit union pre-approval in hand, you can skip all that.

Finally, you shouldn’t overlook the value of the great member service you get from your credit union. When you finance through a dealer, you’re handed off to some lender with whom you’ll probably never do business again. Finance with your credit union, and you’ll be working with people you know and trust – and who will help you through good times and bad.

Bottom line: Credit union auto financing is the smart choice.

For more information, review our website, or to speak to a loan officer, call 901-226-1111.