Which is better finance a car through a dealer or credit union?
There are pros and cons to financing your vehicle purchase with dealer financing or with a credit union car loan. It’s important to understand the benefits and the process to determine which loan is truly best.
Before heading to the dealership, you may want to learn the best practices in buying a car.
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Dealership Financing Pros
Dealership at times offer great financing deals but you have to be aware of the specific rules used to determine your interest rate, payment terms and conditions.
Many people who are lured into a dealership because of 0% financing find they are not eligible for the promotion. Dealers can offer financing from the automakers’ financing arm or through partnerships with lenders. They often do what they can to get you into the car. However, this may not be in your best financial interest.
When a car salesperson runs your credit report, it’s shared with a number of partner lenders who will respond with a decision. You might never know how many of those lenders approved you as the dealer may only choose one to share.
- Get pre-approved through Even Financial before heading to the dealership.
If you have less than perfect credit, you might find the loan offers from lenders with high interest rates and fees. Some of these loans could include additional charges such as origination fees or penalties for early payoff. You might get the car off the lot with high interest rates and monthly payments you can’t afford long-term.
Be mindful with the offers and don’t be pressured into a taking a loan. You want to make sure the lender is a reputable company with a solid track record.
Credit Union Financing Pros
Credit unions are not-for-profit financial institutions offering very competitive loans for cars.
Financing with a credit union can be more ideal for the majority of people who have good to excellent credit. They offer lower interest rates with better terms saving you more money in the long-run. Financing your car directly with your bank or credit union is pretty hassle-free and dealerships know how to handle these types of purchase transactions.
Another key benefit of financing through a credit union is that you can get pre-approved for a loan amount and use that approval to help you negotiate on a car purchase. You’re also not pressured by a car salesperson who may get a bonus for having you finance in-house.
- Find a credit union to join.
Dealer Financing or Credit Union Car Loan
No matter which financing you choose, make sure you do your research and compare the offers. Do not feel pressured to sign a loan from a dealer to get the car. Be confident in walking away from the deal if you feel uncomfortable. It helps when you already have a pre-approval from a credit union.
What can you do? Know your credit report and credit score before applying for any car loan. It may be good to check your credit score first using an app like Credit Karma.
Want more options to financing a car? Check out the our financial marketplace for alternative financing.