Those who are looking for auto loans to finance their next vehicle purchase may have been told to check into a credit union auto loan option. It’s true that credit unions can provide specific kinds of auto loan benefits. Here are some of the pros and cons of going through a local credit union for an auto loan.
Pros of Credit Union Auto Loans
Credit Unions Are “Established Lenders” – In the general crowd of parties offering different auto loan options, credit unions are considered by many financial experts to be among the most established, along with banks and captive finance companies. On the other end of the spectrum are small, nebulous and sometimes shady lenders who offer auto loan products like auto title loans, payday loans or other personal loan types. Those looking for borrowing options can often get much more solid arrangements through the more established lenders.
Credit Unions Are a Local Connection – One thing that many auto loan customers like about credit unions is that they may be more responsive to your personal situation than a bank or captive finance company. That’s because credit unions work on the principle of paying attention to their members. If you are a member of a credit union, it’s worth checking into what they can do for you in terms of a personal auto loan.
Credit Unions Offer Competitive Interest Rates – Part of their specialized attention to members is that credit unions can offer interest rates that are competitive. Just like with certificates of deposit or other account options, credit unions can offer their own specific rates to keep their limited client base interested in coming back to them.
Cons of Credit Union Auto Loans
Credit Union Auto Loans Aren’t Dealer Direct – One type of auto loan customer is the “dealer direct customer.” These individuals and households like to go to the dealership, pick out a vehicle and include financing in the total negotiating package. For these kinds of customers, getting a credit union auto loan would just be an additional hassle.
Credit Unions May Not Offer “Specials” – In contrast to participating dealerships and the captive finance companies that often end up financing their loan options, credit unions are not often primarily in the business of doing auto loans. They may not have as much specific knowledge as dealerships and captive finance companies who are connected to a specific auto maker. If this is part of your financing equation, think about whether it makes sense to go through a credit union or work more directly with the various agents of a manufacturer, particularly in certified pre-owned auto purchases.
The above reflects some of the better and worse points of choosing a credit union for an auto loan. It’s worth noting that credit unions and banks can offer loan pre-approval as part of the strategy for avoiding the limitations that some customers find in financing through a dealership. Each car shopper has their own philosophy and strategy for getting the best on the loan options around. Think about whether a credit union auto loan option is right for you.