Here’s How to Find the Right Auto Loan

If you are thinking about purchasing your dream vehicle, you may be considering an auto loan to pay for it. Walking into a car dealership and expecting to haggle your way to a great deal may seem like the best option but we encourage you to consider a better way to find an auto loan. Dealership financing may only focus on price or monthly payments without consideration of how the auto loan will impact your financial health.

You can shop auto loans at credit unions even if you aren’t a member. Credit unions can help you figure the real value of the vehicle and provide personal service after you sign on the dotted line. Because credit unions are about building relationships and supporting its members, there is often greater flexibility in lending requirements when compared to commercial banks and dealer financing.

Take Your Time

Research loan rates before you go to the dealership. Shop for a loan that meets your budget instead of shopping for an automobile and then finding a loan. You’ll save money because you’ll be less likely to buy more car than you can afford.

Decide whether you want a new or used vehicle before you apply for a loan. Interest rates vary depending on the type of loan.

More Than a Monthly Payment

Other lenders might lead with the monthly payment as the deciding factor in vehicle affordability. When borrowers only focus on the payment, they miss the bigger picture of loan costs. A lower payment is often available due to extended repayment terms.

For example, a $20,000.00 vehicle with a $3,000.00 down payment to be paid off in 36 months may cost $510.00 a month assuming a 4.95% interest rate. The same loan at 84 months only requires a $248.00 monthly payment.

The difference in the payoff time can make the vehicle affordable right now, but you need to consider other expenses that are on the horizon, i.e., family reunion, college tuition, etc. A lower payment frees up money in your monthly budget, but you will pay more for the vehicle over the life of the loan.

Know Your Credit Score

Know your FICO Credit Score before you shop for an auto loan. If your credit score is lower than expected, order free copies of your credit report from annualcreditreport.com to identify the cause of the low score. Obtain one from each of the three major credit agencies: Equifax, Experian, and TransUnion. Review each report and follow instructions for removing any inaccurate information.

Even though a credit union is more likely to provide lender flexibility, credit history is still important. While a credit score of 800 isn’t required to get the best auto loan deal, a good credit score is one of the primary factors in lending decisions – even at credit unions.

Promotions and Vehicle Upgrades

Let the dealership know you are shopping around. Ask “What’s the best deal you have for me?” Make sure you know what promotions and special rates are costing you in the long run. A free upgrade to the vehicle may not be “free” if dealer financing includes numerous fees from the sales contract that you didn’t expect.

At Hughes Federal Credit Union, we believe our commitment to our members is bigger than one-time promotions and vehicle upgrades. We don’t switch loan rates based on your credit score. When we give you a rate, it’s not “as low as.” It’s simply one interest rate for all approved applicants. If you finance your loan with a credit union, you’ll also be able to take advantage of other member services.