You’ve done your research, you’ve found your dream car, and now you are probably trying to figure out how you’re going to get money to purchase a brand new car. The good news is that you have options. You could finance a car through a credit union or through a dealership. Here is what you need to know before deciding which route to go.
Financing Through a Credit Union
When financing with a credit union, you usually will want to go directly to the branch and get pre-approved for a loan before you ever set foot in a dealership. The member advisor at the credit union will give you a quote and a letter of commitment that you can take to the dealership. In addition to saving you time when finalizing the contract, it also helps prevent a car salesperson from trying to persuade you to include add-ons that you don’t need.
Depending on the credit union, you may be able to apply for pre-approval online or at a local branch. As you complete work on this, you may need to provide information about the vehicle, which could cause some delays if you’re not yet sure what you want.
The rate that is offered from a credit union will be the true interest rate and doesn’t include any markup, which could happen if you work with a dealer. In general, though, the rate quote you get isn’t always the final offer. Once you decide on the vehicle and give permission to have your credit run, your full credit report is reviewed before approving your application and determining your loan rates.
Financing Through the Dealer
When going to the dealership to finance your car, it would be the same if you went to a credit union except instead of doing it yourself, the dealer is doing the work on your behalf.
After you choose your vehicle, the dealer will have you fill out a credit application, which they’ll submit to multiple lenders. This allows you to compare rates and terms to choose the best option for you.
However, you will want to be careful because a dealer may negotiate a higher interest rate with you than what the lender offers and take the difference as compensation for handling the financing.
How to Choose the Best Option
Ultimately, it is better to choose the option that saves you more money. However, it may be challenging to determine based on what car you are looking at getting and what each party is able to offer.
The best thing you can do is to get pre-approved by your credit union before you head to the dealership, and then asking to get quotes from the dealer so you can compare and determine which option is best.