Most people turn to banks or rely on dealerships when financing an automobile. However, more and more car buyers are obtaining car loans through credit unions because of some key advantages they offer over banks. Following are the primary reasons reason why financing a new vehicle through a credit union may be your best choice:
Credit Unions can offer lower finance rates than banks
When you join a credit union, you are a shareholder rather than a customer. This is an important distinction because as a customer-owned business, credit unions are not beholden to paying dividends to third-party investors. Instead, the cost-savings is returned to its members (shareholders) in the form of lower rates. Also, because credit unions are non-profit organizations, they are not concerned with creating costly add-on services in order to inflate the bottom line.
According to the National Credit Union Association, as of June 2018, the average 60-month new car finance rate through credit unions was 3.16%, compared to 4.86% for banks. On 48-month new car loans, credit unions offered an average finance rate of 3.04%, against the average bank loan rate of 4.74%. Credit unions also offered a lower average finance rate than banks on used car loans – 3.22% versus 5.24% for 48 month loans.
This loan rate differential can save consumers hundreds of dollars per loan if they finance their cars through credit unions rather than banks.
Credit Unions have more flexible lending practices
Banks generally follow stringent lending policies that eliminate from consideration many customers who have less-than-perfect credit ratings. Credit unions typically have lower credit thresholds for their best loans and will often work with members to approve car loans that would not be offered by banks. In some cases, credit unions will even overlook collections on a credit report, as long as the balance has been paid off.
Superior customer service
Because many banks are part of nationwide operations, they tend not to be community oriented. Credit unions take active roles in their communities and consider their members to be neighbors rather than customers. Consequently, credit unions are more likely than banks to extend personalized service to their members. For example, a credit union will often make flexible payments arrangements when a member has difficulty making a loan payment. Credit unions also offer as much flexibility as banks when it comes to convenient loan payment options, giving members the ability to make payments online or over the phone.
Credit Unions focus on consumer financial education
Credit unions have adopted a philosophy that a wise consumer makes better investment choices. As a result, its officers work with members to help them make the best decisions on car loans and other financial issues. Credit unions frequently offer seminars to provide sound financial advice to its members.
Credit unions return their profits to their shareholders rather than outside investors. Consequently, they can offer reduced rates on other products such as homeowner loans, personal loans, and credit cards.
Quick Facts about Credit Unions
- As of August 2018, U.S. credit unions had 117.6-million members.
- There are more than 6,000 credit unions in the United States.
- Although some credit unions are restricted to specific memberships such as government employees and teachers, many are open to all members.
Comparison of Average Savings Deposits at Credit Unions (CUs) and Banks for June 29, 2018
Credit Union Data and Statistics, Monthly Credit Union Estimates, August 2018.
United States Credit Union Director, October 2018.