If you’re like most people, when you think “car finance,” you think of big, faceless multinational lenders trying to stuff your loan full of bells and whistles you don’t need at sky-high rates. But it doesn’t have to be that way. Let’s look at how your local credit union can make financing a new car effortless.
Car Financing, Community Style
So, you’re looking to get a new car. Congratulations! Whether it’s your first car or your fourteenth (in which case, we’re very impressed), it’s always exciting to take that step and pick up a new coupe, sedan, truck, van, or any other vehicle you’ll be bringing home.
However, unless you’ve been blessed with great fortune in your life, it’s unlikely that you have the cash on hand to just walk into your local dealership and drive out, keys in hand. Buying your next dream car is probably going to involve getting a car loan.
When shopping around to find a provider for your new car loan, you might be tempted to go to the big bank down the street. It’s not a completely crazy idea; major banks have deep pockets and usually top-line technology.
We’re certainly not saying that you shouldn’t ever look at large banks—it’s important to know your options, and it’s possible that you might get a great deal at one of them. But you should look at InRoads Credit Union too.
Credit unions are a perfectly valid and viable alternative to banks for car loans, and more and more Americans are realizing just that. A 2017 study found that car loans made up nearly 35 percent of all business conducted by credit unions. That’s more than a third, just on car loans alone!
What’s so appealing about getting car finance from a credit union?
1. Credit Unions Are Part of Your Community
There are some wonderful people who work at major banks, from tellers to bankers to managers. But ultimately, each and every one of them is beholden to the corporation, which is, in turn, beholden to its shareholders. This means that even if a banker really wants to give you a great deal on a loan or work with you when sudden expenses make it difficult to keep up with your payments, their hands might be tied.
At a credit union, the owners are the community—the people like you who keep their money in the union. If you have an account with the credit union in question, this makes you not just the customer, but also a person the credit union is accountable to!
All of this means that a credit union won’t ever be incentivized to nickel-and-dime you or pack your loan full of catches and clauses you don’t need. In fact, the credit union has an incentive to keep you, the owner of the credit union, happy with excellent service.
2. Credit Unions Have Better Interest Rates than Banks Do
Because credit unions don’t feel the pressure to squeeze every possible penny out of their customers, they can offer loan rates that are very competitive with—and often superior to—those that a bank will offer you.
This is very clear when you look at this data compiled by the National Credit Union Association in 2017. Averaging the interest rates of banks and credit unions across the country, it’s very clear that across the board, credit unions charge lower interest rates than banks do for every type of car loan.
While it may be tempting to just dismiss the difference of a few percentage points as negligible, it adds up over time. A difference of just 2 percent in monthly rates could add up to hundreds of dollars over a year, or even thousands of dollars over the course of paying off the loan!
3. Credit Unions Charge Fewer Fees
Remember that nickel-and-diming that banks can often be incentivized to try? Some of the biggest killers for your bottom line are hidden, unexpected fees. For instance, some (but not all) car loans come with a “prepayment penalty” if you try to pay off your loan ahead of time. Credit unions, on top of their lower rates, are less likely to have hidden fees that sneak up on you to snatch some proverbial cash from your wallet.
There are many hidden costs to car loans, some of which—like registration fees, document fees, and so on—may be required by the state and, as such, be unavoidable, no matter your car finance partner. But this just means you should try to avoid the ones you can.
4. Face-to-Face Service
Because credit unions are typically localized to a given area, that means they know the area and its community and culture well. If you’re in Washington, the rules for your national bank in Washington may have been set by the bank’s headquarters in Delaware.
In contrast, a credit union is likely to have a much better understanding of where you live and where you come from, and you’ll be able to connect with people up and down the chain of command in a way you can’t when the corporate office is on the other side of the country.
5. Credit Unions Return Profits to Their Members
A credit union’s duty is to its members. Credit unions are fundamentally nonprofit businesses, which means that the profit they make from car loans like yours goes back into supporting their members. If you’re a member, this means the profit on your car loan is, in a way, going back into your profit! It may not be a direct payment, but between great rates on things like mortgages, other loans, credit cards, and lower fees, the fact that you’re supporting a credit union lets it support you.
We think it’s pretty obvious that if you’re looking for a new car finance partner, credit unions should absolutely be in the running. If you’re curious about how car financing can work through a credit union, contact InRoads Credit Union today to learn more.
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