When financing a new vehicle, there are several options that buyers can choose. Financing through the dealership has its appeal, but in the long run it’s usually best to speak with a loan professional at a local financial institution.
Pros of Financing Through a Dealership
The main two reasons that people finance their vehicle through a dealership are ease of use and promotional pricing.
You’re already at the dealership to get your new vehicle, so it might be tempting to get everything taken care of in one place. Also, dealerships will often offer some form of promotional pricing to finance through them, such as 0% interest for 6 months or cash rebates for financing directly through the dealership.
Sometimes, these low rates or 0% financing deals are only available under certain conditions. You may begin the process of financing through the dealership only to find when signing paperwork, you did not qualify for the promotional pricing and are signing for a loan with a higher rate than what you could have received through your local credit union. Dealerships focus primarily on the payment amount and will deemphasize the interest rate and/or term for the loan through the dealership.
Though this might be worth it short-term, over the course of the loan it’s usually best to shop around.
Pros of Financing Through a Credit Union
The main reasons to finance through a credit union include lower loan rates, lower fees, customer service, lower minimum loan requirements than a bank, and better chances of loan approval than some other lenders offer.
Credit unions are not-for-profit organizations that reinvest any profits back into the membership (instead of given to investors, like with a bank), which means they can offer lower interest rates.
Another bonus is, as a credit union member, you have a say in how the credit union is operated. Having your money at a credit union means that you have a say in how that money is used.
The loan process at a credit union is similar to other lenders, meaning you will have to present documents such as proof of identity, income, employment information, and credit history. A loan officer will work with you to get you the best possible deal.
Requesting a loan through your local credit union increases transparency, meaning most loan officers will cover the rate, term, and payment amount when signing documents. Also, loan officers are happy to answer any questions you have about the loan itself or any ancillary products you may be interested in, like debt protection and GAP insurance.