Is your current car nearing the end of its life? Do you need a different type of vehicle for your business? A new or used car is a significant financial investment, and before you head down to the lot to pick out your new ride, you need to consider the difference between a credit union auto loan like one from People Driven Credit Union and the offer you will get from a dealership.
Understanding Your Auto Financing Options
While the simplest option for purchasing an automobile is to show up to the dealership with the exact amount in cash, the vast majority of people cannot do that.
One option is to lease a vehicle. You can pay monthly installments on a car for a set period of time, and these payments are often less expensive than the monthly cost for a purchased car. However, you do not actually own the car. When the lease period ends, you will need to return it to the dealership, though options do exist to buy the car at that later date.
The most common approach is to purchase your car with an auto loan; but when it comes to securing a loan, there are still plenty of variables to consider. Whether you buy a new or used car can alter your interest rates, and whether the loan is secured or unsecured can affect your rates as well. However, the most important variable in the auto loan process is whether your loan is direct or indirect, meaning whether you finance the loan yourself or the dealership does it for you.
Your Loan Starts Here
Begin your path to financing your dream. We'll help you turn your financial goals into reality.
How Dealership Financing Works
When you are financing with an indirect loan, you will simply arrive at the dealership, pick out a vehicle, and the dealership will work with a series of lenders to arrange a loan for you.
The attractiveness of this option is its convenience, as it requires no work on your end. However, it will result in interest rates that are higher and terms that are less favorable than if you secure your auto loan directly.
How Credit Union Auto Loans Work
When you finance your loan directly with your credit union, you can much more easily adapt your options to your budget and negotiate more confidently.
At People Driven Credit Union, we put our members first, offering competitive auto loan rates, flexible terms, and personalized service designed to save you money and to make car ownership stress-free.
Credit Union Auto Loans vs. Dealership Loans: Key Differences
While there are plenty of similarities between the two, there are a handful of major differences between financing your auto loan at a dealership and at a credit union. The best way to ensure your next car purchase is as stress-free as possible is to familiarize yourself with those different options.
Comparing Interest Rates and Loan Terms
It is not the sheer size of your auto loan that impacts your monthly payments; it all comes down to your interest rates and loan terms.
The interest rate for an auto loan (typically an Annual Percentage Rate, or APR) is the percentage that the loan will increase by the time the full amount has been paid off. In total, it is the amount of money a financial institution earns to offset the risk of loaning out money.
A loan term is the amount of time a borrower has to pay off that loan. Loan terms are often measured in 12-month chunks.
The two are connected, with shorter terms typically corresponding to lower interest rates but higher monthly payments. Additionally, the larger your down payment is, the lower your rate and the shorter your term can be.
When you get your auto loan from a dealership’s financial partners, they will typically want to charge a higher interest rate while also scheduling for a shorter term. At People Driven Credit Union, we want what is best for our members, so we can offer more favorable terms. Our credit union auto loans can feature rates as low as 4.79%¹ APR* and terms as long as 96 months. Using PDCU’s auto loan calculator, you can see how shifting the size of the loan, interest rate, and loan term could affect your monthly payment.
The Role of Credit Scores in Loan Offers
A number of factors play into what interest rate you will be offered for your auto loan, but a critical factor is your credit score. Put simply, the better your credit, the better the rates and terms you will be offered.
When you get your loan through a dealership, they will not care about trying to improve your financial situation. At PDCU, we have a number of strategies that we can use to help our members improve their credit before they need to apply for their loan, from paying bills on time to reducing overall debt.
Fees and Hidden Costs: What to Watch For
When you purchase your car, there are a handful of additional costs you can expect to pay, like title and registration fees or sales tax. However, there can also be a variety of surprise fees to keep an eye out for that can pop up at different financial institutions.
A common one is an origination or application fee, charging you a one-time fee for the clerical work and paperwork involved with processing your loan application. Another prevalent hidden cost is a prepayment penalty, with some lenders charging a set amount when a loan is paid off before the end of the original term. A dealership may also try to convince you to tack on additional amenities, like extended warranties, protection for your interior fabric, or rustproofing for your exterior.
Your Loan Starts Here
Begin your path to financing your dream. We'll help you turn your financial goals into reality.
Flexibility and Member Benefits with Credit Unions
PDCU tries to go the opposite way, giving our members surprise savings. Aside from the standard benefits of friendly, personalized service, we also offer our members an AutoPay discount program, with a decrease of 0.25% APR when you set up automatic payments from your PDCU checking or savings account. Additionally, members can utilize our Skip-a-Payment program once per year to take a one-month break from paying off your loan for a $35 fee. PDCU also periodically runs seasonal rate specials and member-exclusive offers to help you get even more of a discount.
PDCU members can also get insurance discounts with the TruStage® Auto & Home Insurance Program, which provides affordable, top-quality protection and discounted rates combined with online convenience and 24/7 claims service.
Why Local Credit Unions Often Provide Better Value
When you get your auto loan financing from an anonymous institution at a car dealership, that lack of connection means your lender does not care about you or your financial goals. When you work with your local PDCU representative to secure your auto loan, you will have a number of services at your disposal before, during, and after the application process to ensure you are getting the best possible deal.
From rates and terms to fees to financial guidance, PDCU will give you more bang for your buck at every step of the way.
How to Apply for a Credit Union Auto Loan
The first and most important step of the loan application process is to assess your budget. Consider not just how your monthly loan payments will fit into your budget, but also any additional maintenance, fuel, or insurance costs associated with your new vehicle. Then, you can begin to brainstorm what term lengths and interest rates you may want to consider. Do not forget to factor in a down payment to potentially lower your monthly payments, coming from either your savings or the funds from selling your current vehicle.
Once you have a plan in place, you can begin the application process online, over the phone, or at your local PDCU branch. In order to apply, you will need a few documents: a valid ID, proof of income (like pay stubs or tax returns), employment information, vehicle details (if you have already chosen one), and proof of insurance.
Final Thoughts: Which Financing Option is Right for You?
Before you are approved, check out our credit union auto loan comparison chart:
| People Driven Credit Union | Dealership | |
| Interest Rates | Offers interest rates as low as 4.79%¹ APR*. | National average interest rate of 6-8% |
| Loan Terms | Offers options from 36 to 96 months | National average of 68 months |
| Fees & Hidden Costs | Up-front about costs; even includes Autopay discount and Skip-a-Payment programs for members | Can include origination fee, prepayment penalty or additional amenities |
| Convenience at Purchase | Will require some preplanned work with phone, online or in-person conversation | Will finance your loan for you at your time of purchase |
| Support & Financial Education | Cares about your financial well-being and has multiple services to help improve your financial options | Will not prioritize your financial situation |
| Credit Score Consideration | Provides guidance for members with diverse credit profiles | Cannot guarantee favorable loan options for customers with certain credit scores |
| Flexibility in Repayment | Offers members the Skip-a-Payment program, with one month per year skipped for a $35 fee | Likely will not allow payment skips |
| Transparency of Loan Details | Offers a loan calculator to provide members the ability to find the right payment for their budget before beginning the application process | Loan details unknown until time of purchase |
FAQs
What’s the main difference between dealership financing and credit union financing?
The biggest difference is that a dealership will apply a one-size-fits-all approach to your loan, whereas PDCU will personalize your auto loan to fit your financial needs.
Can I still get a car through a dealership if I use a credit union loan?
Yes. Getting a loan from your preferred financial institution before going to the dealership is called a direct loan and is very common.
Do credit unions offer pre-approval for auto loans?
Yes, People Driven Credit Union offers pre-approval for auto loans. Pre-approval helps you understand how much you can afford and gives you leverage when negotiating with dealers.
Are there fees or penalties for paying off a credit union loan early?
People Driven Credit Union members can pay off an auto loan at any time with no penalty.
Can I refinance my dealership loan through a credit union?
Yes, you can refinance your previous auto loan at PDCU to change your term length and monthly payments.
How do I apply for an auto loan with People Driven Credit Union?
You can apply on our website, or by calling 248-263-4100.
Disclosures
**Certain limitations may apply. Please consult with a representative for further information. Loans are exclusively available for new and used cars, trucks, and SUVs. Membership with the Credit Union is mandatory for loan disbursement. For 30, 60, or 90-day no-payment loans, interest will commence accruing upon loan disbursement and will be spread out over the subsequent monthly payments.
*APR = Annual Percentage Rate: The actual APR and loan term is subject to approval and may be determined upon the borrower’s creditworthiness, the amount borrowed, and the type, value, age, and condition of the collateral offered to secure the loan (when applicable). Rates are effective as of today and are subject to change.
¹Special Loan Rate Discount: Benefit from a .25% reduction when enrolling in our autopay service, which is included in the “as low as” rate advertised. The discount is available to those who setup autopay of their monthly loan payment from a People Driven Credit Union checking or savings account.
People Driven Credit Union is an Equal Housing Opportunity Lender NMLS #776727.
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