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Americans spend thousands each year on car payments - in 2024, the average new car payment exceeded $700 a month, while used vehicles cost an average of $525 a month. In light of rising monthly installments, shopping around to secure the best auto loan rate and terms is well worth the time and effort!
What if you already have an auto loan? Don’t worry. Refinancing is easier than you think, and it’s never too late to save by switching lenders.
Let’s take a closer look at credit union auto loans and how to secure the best rate possible when financing a new or used vehicle.
When you borrow from a lender, they make their money by charging a percentage of the sum borrowed, known as interest. This amount is spread over the loan term, meaning that a portion of your car payment goes toward monthly interest.
You will come across terms like APR and interest rate when shopping around for a car loan:
Your interest rate can vary. Essentially, lenders will increase it if they see your loan as risky (in other words, if they believe there is a risk of you defaulting on the loan).
However, a wide range of factors goes into setting your interest rate, which is why the cost of borrowing can vary so much from one lender to another. When comparing rates, you’ll typically get the best ones with credit unions – in fact, in 2024, the average credit union auto loan rate for a new car on a 48-month term was 5.91%. The same loan came with an average interest rate of 7.45% with traditional banks!
Why is there such a difference? Credit unions operate on a not-for-profit model. When they generate a surplus of money, they pass on the savings to their members in the form of lower rates.
Because large banks want to earn profits, they will typically charge more for borrowing. Plus, in an effort to be cost-effective, they will usually look at a limited range of factors when reviewing your application and set your auto loan rate without considering your full financial profile.
We should also warn you against financing your car at the dealership. While getting loan rates directly from a dealer is convenient, you should know that dealerships tack on their own fees to your loan (bloating the APR) and will recommend the loan with the best commission for them, not the best rate for you.
For these reasons, getting pre-approved by a credit union is the best way to save on your auto loan!
Are you curious about how lenders come up with your auto loan rate? Factors can vary, but the following points will stand out on your application and influence your rate:
Thanks to our tailored approach, you’ll save even more. We offer flexible lending options, including up to 100% financing and terms as long as 96 months. Finding a loan that works for your budget is easy!
Plus, you can count on us to look at your profile in detail and come up with an interest rate that truly reflects your financial situation beyond your credit score. Even if your score could use a little boost, things like a solid employment history will play in your favor.
As an added benefit, our Auto Advisors service is a great way to shop for your new vehicle. Tell us more about what you’re after, and Auto Advisors will find the perfect car for you, take care of any price negotiations, set up delivery of your new vehicle, and help you get more out of your trade-in – all for free.
Ready to finance your next at a great rate? Interested in lowering your monthly payments by refinancing your auto loan?
Take a look at our latest auto loan rates, apply for a loan online, or visit one of our branches to learn more about your borrowing options.
Americans spend thousands each year on car payments - in 2024, the average new car payment exceeded $700 a month, while used vehicles cost an average of $525 a month. In light of rising monthly installments, shopping around to secure the best auto loan rate and terms is well worth the time and effort!
What if you already have an auto loan? Don’t worry. Refinancing is easier than you think, and it’s never too late to save by switching lenders.
Let’s take a closer look at credit union auto loans and how to secure the best rate possible when financing a new or used vehicle.
How Are Credit Union Auto Loan Rates Calculated?
When you borrow from a lender, they make their money by charging a percentage of the sum borrowed, known as interest. This amount is spread over the loan term, meaning that a portion of your car payment goes toward monthly interest.You will come across terms like APR and interest rate when shopping around for a car loan:
- APR is short for Annual Percentage Rate – It includes your interest rate bundled with any additional loan fees, such as origination fees.
- Your interest rate is more straightforward. It’s the percentage of the loan amount your lender charges you for borrowing money.
Your interest rate can vary. Essentially, lenders will increase it if they see your loan as risky (in other words, if they believe there is a risk of you defaulting on the loan).
However, a wide range of factors goes into setting your interest rate, which is why the cost of borrowing can vary so much from one lender to another. When comparing rates, you’ll typically get the best ones with credit unions – in fact, in 2024, the average credit union auto loan rate for a new car on a 48-month term was 5.91%. The same loan came with an average interest rate of 7.45% with traditional banks!
Why is there such a difference? Credit unions operate on a not-for-profit model. When they generate a surplus of money, they pass on the savings to their members in the form of lower rates.
Because large banks want to earn profits, they will typically charge more for borrowing. Plus, in an effort to be cost-effective, they will usually look at a limited range of factors when reviewing your application and set your auto loan rate without considering your full financial profile.
We should also warn you against financing your car at the dealership. While getting loan rates directly from a dealer is convenient, you should know that dealerships tack on their own fees to your loan (bloating the APR) and will recommend the loan with the best commission for them, not the best rate for you.
For these reasons, getting pre-approved by a credit union is the best way to save on your auto loan!
Top Factors Influencing Auto Loan Rates
Are you curious about how lenders come up with your auto loan rate? Factors can vary, but the following points will stand out on your application and influence your rate:- Loan type. Auto loans are usually secured and have a fixed interest rate. It means your new ride is used as collateral to reduce the risk the lender takes, and your rate won’t change over time.
- Credit score. You’re no stranger to the fact that lenders look at your credit score as a sign of your creditworthiness. A high score means you know how to manage credit and can be trusted to make your payments on time, while a low score or limited credit history can result in a higher rate.
- Debt-to-income ratio. Your credit score isn’t everything. Lenders will examine your debt-to-income ratio to ensure your budget has enough room for a car payment. Before shopping for an auto loan, paying off any existing loans or credit cards can be a smart move.
- Down payment. Paying for a portion of your new or used car upfront makes you far less likely to default on the loan in the eyes of a lender. To secure a better rate, take an extra month or two to save up for a bigger down payment!
- Loan term. The loan term, or loan duration, greatly impacts your interest rate. For a short-term loan, lenders will seek to make money quickly, resulting in a higher rate.
- Vehicle. What's your dream car like? The make, model, year, and overall value of the car you choose can impact your auto loan rate. Expect the cost of borrowing to go up for used or luxury vehicles.
How Is Power Financial Credit Union Able to Offer Low Auto Loan Rates?
What makes us the best credit union for auto loans? As a well-established credit union with close to 35,000 members in South Florida, PFCU is able to pass on savings to its members in the form of lower auto loan rates for new and used vehicles and refinancing options.Thanks to our tailored approach, you’ll save even more. We offer flexible lending options, including up to 100% financing and terms as long as 96 months. Finding a loan that works for your budget is easy!
Plus, you can count on us to look at your profile in detail and come up with an interest rate that truly reflects your financial situation beyond your credit score. Even if your score could use a little boost, things like a solid employment history will play in your favor.
As an added benefit, our Auto Advisors service is a great way to shop for your new vehicle. Tell us more about what you’re after, and Auto Advisors will find the perfect car for you, take care of any price negotiations, set up delivery of your new vehicle, and help you get more out of your trade-in – all for free.
Explore credit union auto loans with PFCU
Ready to finance your next at a great rate? Interested in lowering your monthly payments by refinancing your auto loan?Take a look at our latest auto loan rates, apply for a loan online, or visit one of our branches to learn more about your borrowing options.