Auto financing is the bread-and-butter business for credit unions. For decades, they’ve coupled super-low loan rates with service so consumer-friendly that some credit unions even give away holiday presents.

Step into a credit union and dive into a mini-resource center of auto buying and finance information. Car shoppers can apply for auto loans online, over the phone, at the branch, even at the dealer.

And once you’ve landed that auto loan, many credit unions, such as the
American Airlines Employees Federal Credit Union, will let you skip a payment around Christmas time.

A holiday present

“It’s a very big hit with members,” say Dianne Craft, coordinator for the credit union’s consumer advice and research service. “Even if it’s just $300 or $400. That’s a nice little extra.”

As for the rates on an auto loan, rates at credit union often beat those at banks. The average rate on a four-year new car loan from the nation’s largest credit unions is a cool 7.55 percent, compared with a national average for banks of 8.23 percent, according to a recent survey.

The rates on credit unions’ used car loans are tough to beat. They can run as low as 7 percent or 8 percent, and the national average for used-car loans, according to the survey, stands at 9.3 percent. Savvy used-car shoppers know the numbers, and flock to their credit unions: Half of all auto loans at credit unions are for used cars, according to the
Credit Union National Association.

Credit union loan rates dip even lower during sales and specials. For example,
ORNL Federal Credit Union is offering a 6.5 percent fixed rate loan for up to five months for new and used cars through June 15. Members who qualify for the loan also receive a $50 rebate.

Gas for college students

State Employees Credit Union of Maryland, has a loan promotion for graduating college seniors, which boasts a $50 gas card from Shell and 7.2 percent financing for loans up to five years. For seniors who can afford a 10 percent down payment, the rate dips to 7.1 percent.

How hard is to qualify for these deals? First, you need to be a credit union member or relative of a member. The rest depends on your credit history.

“We try to look at an individual member’s situation,” says Sharon Sykes, vice president of marketing for State Employees in Maryland. “Credit unions are a little bit more likely to take a chance on members than, say, a bank.”

Cutting members some slack

Credit unions also are more likely to cut members some slack after the loan is made. Many credit unions for teachers allow members to skip a payment during those lean summer months. American Airlines Employees Federal Credit Union doesn’t charge a late fee for auto payments received past the due date. That’s right — no late fee whatsoever.

“Credit unions use simple interest loans,” Craft explains. “So if you end up paying late you’re going to end up paying more.”

In addition to going easy on late payers, credit unions also like to reward members who have multiple accounts. These “relationship” customers receive discounted rates, often 0.25 percent or 0.5 percent off a regular loan rate.

And it’s never been easier for people to apply for a loan from a credit union. At State Employees, members can apply for auto loans online, over the phone, at 10 branch locations and 80 dealerships.

“The name of the game is convenience,” Sykes says. “If they can’t get to us, we’ll try to get to them.”

Like consumer experts, many credit unions also urge members to get financing approved before car shopping. That way, members have one less thing to worry about while haggling for prices at dealerships.

“The members can essentially shop as a cash customer and that’s what we instruct them to do,” says Larry Jones, vice president of marketing at ORNL Federal Credit Union.

If members, like so many people out there, get so caught up in the excitement of car buying that they get stuck with a high interest rate loan, they can always refinance it for a lower rate loan from their credit union.

“At credit unions, our principal motivation is not to maximize profits for shareholders,” Jones says. “It’s to serve our member owners.”

Lease look-alike loans

With leasing taking off in popularity, many credit unions have started offering lease-look-alike loans, which are structured like a loan but have a payment plan similar to a lease. As with leases, members get more car for their monthly payment, but a big back-end price if they want to buy.

At the end of the loan, which often ranges from two to six years, a member has the option of selling the car and paying off the balance; trading the car in and paying off the balance; keeping the car and refinancing the amount owed, or simply returning the car to the credit union.

Some credit unions also have started lease programs of their own. But Bill Klewin, vice president at the credit union association’s mutual lending lab, points out that it’s difficult for lease-look-alike loans and loans from credit unions to compete with lease terms from the dealer. The reason? Dealers can manipulate the cost of the car and its financing to give buyers the low monthly payment they want and still make a tidy profit.

Dealers also can be hard to beat on new car financing, as well. Neither banks nor credit unions can match dealers who decide to offer 0.9 percent and 1.9 percent financing.

Information centers offered

Making sure members get the overall best auto deal is the aim of the mini auto-information centers found at credit union branches and on credit union Web sites. Information includes everything from car insurance to wholesale purchase prices to the ins and outs of leasing.

“An informed consumer is going to make the best choice,” Sykes says.

And if the best choice for a member ends up being financing through the dealership, many credit unions say: “Fine.”

“Our credit union’s philosophy is whatever the best rate is for the member,” says Craft of American Airlines Employees Federal Credit Union. “If the dealer has a lower rate, it’s OK for them to finance with the dealer.”

Coming April 14

Used-car leases have become hot, as longer-lasting cars and a flood of once-leased cars in good shape come onto the market. But are they a good deal?