If you’re thinking about buying a new or used car, a credit union is a great choice for a loan.
“Part of the reason for that is the deals are great at credit unions,” says Mike Schenk, vice president of research and policy analysis/advocacy at the Credit Union National Association, or CUNA, a trade association. “You’d be crazy not to include a credit union in your shopping plans.”
National banks do have some advantages over credit unions. They have more branches and are usually quicker to roll out new technology. But consumers keen on saving money owe it to themselves to explore what credit unions have to offer.
Here are six reasons to get your next car loan at a credit union.
Compare auto loans today on Bankrate.com.
1. Lower interest rates
A big reason credit unions are seeing leaping growth in car loans is because their interest rates are at least 1 percent lower than banks. The average rate on a five-year new car loan from a credit union is 2.97 percent. At banks, it’s 4.5 percent, according to Bankrate.com’s weekly rates survey. If you’re buying a $30,000 car, the credit union saves you at least $1,100 in interest over the life of the loan.
“Typically, the rate of lending (at credit unions) is very competitive compared to other lenders under most circumstances,” says Bill Meyer, who handles public relations and corporate communications at CU Direct, which connects credit unions with auto dealers across the country.
2. Community ties, personalized service
The car-loan process isn’t that different at banks and credit unions. But credit unions, because they’re smaller and have close ties to the communities they serve, are more likely to work with you if you hit a rough patch and need more time to make a payment, for example.
“Credit unions are likely to have more flexibility in the underwriting process,” explains Schenk. “You have a unique story and your story is much more likely to be heard at a credit union. At large financial institutions, you’re more likely to experience underwriting that is set in stone and done in some corporate office a few states away. Walk into a credit union and you’re more likely to have a conversation.”
Use Bankrate’s auto loan calculator to estimate your payments.
3. User-friendly loan process
Members used to have to go into the credit union office and apply for a car loan face-to-face with a loan officer. Not so today, according to Meyer. Applications for a credit union loan can be done at an auto dealership, online or over the phone.
If you’re applying for financing at a dealership, “invariably, the dealer can refer you to credit union financing and a credit union you can join as a member,” Schenk says, “so it’s really an easy process.”
4. Credit unions have many other benefits
Credit unions are owned by their members — not shareholders — and any profits they make go back to the members. Because of that, credit unions can offer lower costs on other products, too, including mortgages, home equity loans, unsecured personal loans and credit cards.
Schenk says credit unions produced over $10 billion in direct benefits to their members in the past year because of their lower interest rates, lower fees and higher yields on savings.
Most credit unions also participate in a shared branch and ATM network. Schenk says CUNA’s members have a shared ATM network with over 40,000 outlets.
Credit unions are focused on educating their members, too, so you can get advice on the financial options that are best for your situation.
“Credit unions are full-service, with the same products as banks. They’re just structured differently and that results in significant benefits for credit union members,” Schenk says.
5. Becoming a member is easy
Some people are under the impression that credit unions are open only to people who work for a certain company, industry or government entity and that anyone not a part of a group can’t join. Meyer says this is no longer the case. “Most credit unions will allow anyone to join.”
CUNA has credit unions with community charters that allow them to serve larger geographic areas. If you’re looking for a credit union near you, visit ASmarterChoice.org and type in your ZIP code. “It would be shocking to find a consumer who didn’t have access to a credit union,” Schenk says.
6. Car loans are a huge part of what credit unions do
Don’t be surprised if an auto dealer refers you to a credit union before a bank. Credit-union loans for new cars rose 14.3 percent over the 12 months that ended Sept. 30, 2017, and used-car loans shot up 11.2 percent. Credit unions had $129 billion in loan balances for new cars at the end of the third quarter of 2017, and $200 billion in loan balances for used cars.
There’s a reason for that. “Not-for-profit credit unions have very favorable pricing on car loans,” says Schenk. “Car loans are the bread and butter of credit unions.”
Find out which credit unions made Bankrate.com’s list of the top five.