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Why a Credit Union May Have Better Car Loan Rates than a Dealer

Why a Credit Union May Have Better Car Loan Rates than a Dealer

Most car dealerships offer financing options when you buy a car from them, but did you know that you’re likely to get a better loan with lower rates from a credit union? In this post, we will go over:

  • The difference between credit union car loans and dealership car loans
  • Why credit union car loan rates are often better
  • Other factors to consider when choosing a lender
  • Insurance options

How Can Credit Unions Offer Lower Car Loan Rates?

What’s the difference between credit union vs dealer financing? When you get a loan through a car dealership, the dealership usually isn’t the actual lender. Instead, the dealer is passing your information on to potential lenders, which means that, in order to compensate the dealer, you may end up paying a higher rate than what the lender actually offers. This is why you’re likely to get a better rate by borrowing directly from a bank or credit union.

In fact, according to national averages, credit unions actually offer even lower auto loan rates than banks. Credit unions are member-owned, not-for-profit cooperatives, and they don’t have to pay dividends to stockholders. All this gives credit unions the ability to help their members save money with excellent car loan rates and other perks.

Beyond Loan Rates: Other Factors to Consider

Interest rates aren’t the only consideration when it comes to choosing the right lender. Depending on your situation, a variety of other factors might be important to you, including:

  • Flexible payment options
  • No early payoff penalties
  • Comprehensive vehicle options (so you can get the car you really want)
  • Help with the buying process
  • More

With the right lender, you can also get access to some pretty great insurance options with your loan. Here are two insurance services we can include with auto loans at Valley Credit Union:

GAP Insurance

Guaranteed asset protection (GAP) insurance covers the “gap” between what your car is currently worth and whatever you still owe. How does that work?

As you have probably heard, new cars start to depreciate as soon as you drive them out of the dealership. If you take out a large loan to pay for your car, there will likely be a period of time when you actually owe more than the current value of your car. But what happens if your car gets badly damaged or totaled during that time?

Picture this:

  • You take out a big loan to buy a new car.
  • After six months, someone in your family gets in an accident, and the car is totaled.
  • You could owe thousands of dollars on a loan for a car that doesn’t even exist anymore.

GAP insurance is designed for exactly this situation. It will pay for the difference between your car’s current value (which regular insurance should cover) and the amount you still owe.

Mechanical Breakdown Coverage

Mechanical breakdown insurance (MBI) covers major vehicle system malfunctions in your car that aren’t related to an accident or poor driver maintenance. MBI won’t cover tire issues or routine maintenance, but if your car’s engine or brakes suddenly fail, MBI will pay for the cost of repairs.

This way, you’re protected in the event that something suddenly goes wrong with your new car.

Are you ready for a free rate quote from Valley Credit Union?

We offer competitive rates, flexible payment options, terms up to 84 months, great insurance options, and many more amazing benefits with our auto loans in Salem, Oregon. Experience the Valley Credit Union difference for yourself.

Apply online, contact us and ask us your questions, or stop by our office to get started.

About the Author

 Justin Roberts, Vice President of Lending

Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.

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