How Can a Credit Union Help You Buy a Car?
Whether you are purchasing a car for the first time, replacing a car, or simply getting an upgrade, buying a car is a huge financial commitment that should not be rushed into. Before signing a deal and driving a new car off the lot, it’s imperative to have a budget set and a payment plan prepared.
You’ve made the decision to purchase a car, truck or van and even know the year, make, model and color you want. You can cross some major things off your list, but a lot of work remains in this very important purchasing decision.
The next step is a big one: Pinpoint how you’re going to pay for your vehicle.
Most people turn to banks or let the car dealer set them up with financing—and often wind up paying more than they need to for their new ride.
Most people are unaware, however, that securing a vehicle loan from a credit union can result in significant cost savings, with increased chances of receiving a loan approval with favorable terms and lower interest rates when compared with going through other lenders.
When it comes to purchasing a car, there are many options that you need to consider before making a final decision. The first consideration should be your budget. How much available funds do you have to put towards the car payments?
You likely have already thought about how much money you can afford to put down in purchasing a vehicle. You might even have an idea about how much you can afford to pay on a loan each month.
But be sure you consider all the costs of ownership when determining what you can afford:
- Monthly car loan payments
- Auto insurance premiums
- Gas and other regular driving costs such as tolls and parking
- Maintenance and other required costs such as oil changes, inspections and registrations
Find a Favorable Car Loan
Depending on the cost of the vehicle you want and how much you can afford to pay upfront as a down payment, you could be making car loan payments for many years. Planning ahead and securing financing before you go to make a purchase can help you save hundreds or even thousands of dollars over the repayment term of your loan.
To find a competitively low interest rate, credit unions are your best bet. As not-for-profit institutions designed to benefit their members, credit unions offer auto loans with competitive loan rates, flexible terms and no pre-payment penalties.
Plus, if your credit history is less than stellar—either because you have limited history or you’ve had some bad marks in the past—a credit union might even offer first-time-buyer or second-chance programs designed to help you get approved.
Get the Coverage You Need
If you’re not sure where to start with insurance for your vehicle, a credit union can likely help. Many credit unions partner with an insurance company to provide policies priced just for credit union members as an added benefit of membership. If you have home, renters’, or life insurance policies, ask those companies about multipolicy discounts that may apply. Compare quotes from a few insurance companies to find the plan that fits your budget and meets your coverage needs and service expectations.
Additionally, if you are financing a large portion of the vehicle cost, you might want to consider adding GAP insurance to your loan. Although your auto insurance will pay a certain amount if your vehicle is totaled or stolen, that amount could end up being less than the balance still owed on your loan. GAP pays that difference so you won’t be left making payments for a car you can no longer drive. When you’re discussing your financing options, a credit union lender can help you determine if GAP insurance might be a good option to add to your loan.
Budget for Related Expenses
Once you’ve figured out how to pay for your car and insurance, don’t forget that you’ll need to budget for more than just your monthly payments. There’s also regular maintenance, inspections and registration costs. If these occasional or annual costs will throw a wrench in your monthly budget, include them by setting aside a fraction each month.
Plus, if your car isn’t covered under any warranty, consider padding your monthly savings so you’ll be able to cover any unexpected repairs. A credit union can help you set up a designated savings account and automatic transfers to make this budgeting process easy.
When you’re ready to buy your next vehicle, you’ll discover many options for obtaining financing. But it’s important to plan ahead and look for the option that’s most favorable to your long-term financial health.
A fantastic place to start looking is at your local credit union.
Imagine going for a joy ride the day you buy your new car. It can be all the sweeter if you know you got yourself the best deal possible by doing your homework and exploring fantastic options available at your local credit union.