This week, we’re excited to share another guest blog post from Nerd Wallet. To learn more about Peach State Federal Credit Union auto loans, visit our web site!
Before buying a new car, spend some time comparing auto loan options. After all, the wrong decision could cost you thousands of dollars in interest. You may find credit unions offer the least expensive financing.
Why a credit union?
On average, interest rates on auto loans recently granted by U.S. banks were almost twice as high as those issued by credit unions. Credit union notes secured by vehicles averaged about 2.9% annual percentage rate (APR) over 48 months for used cars, compared with almost 5.5% on similar bank loans, according to the National Credit Union Administration’s report for March. For new cars, the rates were 2.7% from credit unions and about 4.9% from banks for 48-month terms, the NCUA report shows.
Credit unions’ lower interest rates can make a shorter loan term a more viable option. While opting for a shorter term usually means bigger monthly payments, it may save you money in the long run. If, for example, you borrowed $15,000 for a car at 6.5% APR for 36 months, your total interest would be about $1,551. If you stretched the same debt over a 60-month term, you’d pay $2,609 in interest – a $1,058 difference!
A shorter loan term will also help you build equity on the vehicle more quickly. That way if you want to sell it or trade it in, you’ll probably get more for it than you owe on it.
Personalized service and flexibility
As not-for-profit cooperatives, credit unions generally offer more flexibility and personalized service than larger regional or national financial institutions. Instead of passing along earnings to private shareholders, credit unions use gains to better serve members. That can include access to resources to make car buying a seamless transaction and extra effort to help those with low credit scores or limited income.
Car buyers looking for the best financing deal may well find it at a local credit union, where profit takes a back seat to service.
Cait Klein, NerdWallet