When buying a new set of wheels, your first stop doesn’t have to be at the dealership. Although many people start their process at the dealer’s site, you will get a lower rate, easier loan application and other benefits by choosing a credit union to finance your vehicle.
This is why people are increasingly choosing to finance their cars directly through credit unions. In fact, auto loans account for over a third of all active loans of 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 and Intrepid Credit Union:
Financing the purchase of a car in a car dealership:
When you visit a car dealership with the intention of purchasing a car, it will most likely ask you how much you are willing to spend on the vehicle of your choice. You may have already calculated your numbers, or you may just have a vague idea of how much you can actually afford. In any case, the dealer may try to convince you to expand the limits you have set as much as possible. They may even try to get you to exceed your maximum bid.
But if you are funding a car purchase through a car dealership, this is just the beginning. Once you have selected the vehicle you want to buy, you will need to fill out a complex auto loan application form that the dealer will send to the financial companies he does business with. These can be lenders and financial institutions. The dealer will then share the lenders’ suggestions with you and ask you to make your choice.
However, in most cases the dealer is only an intermediary. This means they can present your options in a way that will benefit them the most, not you. Through this practice, a fantastic proposal may be presented higher than it actually is, or it may not be presented at all.
For example, suppose your dealer contacts three lenders: Lender A, Lender B, and Lender C. Lender A agrees to offer you 5% APR, Lender B offers 6% APR, and Lender C offers 7% Annual interest. But the lender will not automatically present you with Lender A’s offer. Instead, they will first determine which lender will bring them the most profit.
The rates presented by the aforementioned lenders are known as “purchase rates” or the lowest possible rate that lenders will provide to the borrower. Lender A may offer the dealer a fixed fee for each new loan the dealer gives them at the purchase rate, with a larger return provided for each new price level of the car, for example, $ 10,000. Lender B, on the other hand, allows the dealer to increase the purchase rate by 3% to the new “contract rate”. The dealer then puts the difference in his profit. Lender C allows the dealer to offer a contract rate 2% higher than the purchase rate.
In the above scenario, it’s not hard to imagine a dealer nudging 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 suddenly “remember” that Lender B is willing to finance the loan at 7% per annum. In any case, there is very little chance that you will end up being presented with an offer that truly suits your interests. And you will not even know that you were deceived!
Financing a car purchase from a credit union:
Getting a car loan from a credit union is a completely different experience. Why? Because we exist to serve your interests. When you enter with the intention of taking a car loan, you will be dealing with people who know who you are and what your financial reality is. No one will try to drag you into a loan that you cannot afford.
The process of applying for a car loan with Intrepid Credit Union is simple, fast and easy. You can even apply for a loan online or over the phone. And if you’re one of our members, you already have the benefit of getting pre-approved!
However, one of the biggest benefits that you will get when you finance a car loan through a credit union is the lower annual interest rate. Since you are working directly with the lender, you will only hear the actual proposed rate and not the increased rate that the car dealer is presenting to you.
In addition, as member-owned and operated institutions, credit unions are known to offer loan rates that are consistently lower than those of major lenders and banks. In fact, according to Bankrate, the credit union’s average annual car loan interest rate in early 2019 was a full point lower than rates offered by banks.
Another key benefit you will get from a credit union funded car loan is a more convenient setting when determining how much you can afford to pay each month for your new car. There is no rush or pressure as you sit and work on your budget. On the contrary, when you are in the parking lot of a dealer surrounded by cars that you would like to afford, you are much more likely to make a decision that you later regret.
If you are looking for a car loan, make Intrepid Credit Union your first stop. You will love the lower price and the friendly, professional service that tells you exactly what you can afford, so you overwhelm yourself.