Understanding Your Car Loan Options: Dealership vs. Credit Union Financing

So, you’ve done the research and found the perfect car, and now you’re ready to think about the best way to finance it.

What are the best options for getting a car loan?

Car dealerships want to make it easy for you to secure financing right there while you’re shopping — and in some cases, that can work well. But it’s good to go into the dealership knowing all your options so you can ensure you get the best possible loan terms.

A lot of people don’t know that you can bring your own financing to the car dealership. What does that mean, exactly?

It means you can reach out to VACU, a bank, or a finance company and apply for a car loan ahead of time. You’ll then bring that pre-approvals with you when you head to the car dealership to make your purchase.

“Starting with your credit union or your bank can give you an advantage at the dealership. We recommend you get pre-approved before shopping for a vehicle. That way, you know exactly how much you can spend.” – Cherry Dale, The Keys to Buying Your Next Car

So, what are the advantages of getting a car loan through your credit union versus financing directly with the dealership?

Getting a car loan at Virginia Credit Union

Benefits

• VACU offers members a variety of car financing options. This includes a range of car loans with competitive rates and varied term lengths to fit your needs and your budget.
• With a VACU auto loan, there is no penalty for paying off your loan early.
• VACU auto loans are calculated using the “simple interest” method. This means the finance charge is assessed on the outstanding loan balance.
• You can apply online and could be approved online.
• As a VACU member, you can get your credit union vehicle financing approved and funded, right at the dealer through our Preferred Dealer Network.
• Easily manage your loan from anywhere with online banking.
• VACU also offers RV, motorcycle, and boat loans.

Considerations

• Getting a VACU auto loan requires credit union membership, which is open to a wide range of individuals and groups. (It's easier than ever to become a member!)
• Applying through VACU is an extra step before car shopping, unless you visit a dealer within our Preferred Dealer Network.
• Bringing your own financing requires coordination with the dealership, but it puts you in a better position to negotiate the best financing option for yourself.

 Questions about getting a car loan at VACU? Check out our FAQ page.

Getting a car loan at the dealership

Benefits

• It’s a convenient option; you don’t need to do anything ahead of time.
• Dealers often have special promotional offers on certain models (such as 0% APR or cash rebates).
• Dealers offer access to multiple third-party lenders all in one place.

Considerations

• Special promotional offers can come with higher monthly payments, shorter loan terms, or additional charges in your purchase agreement. Read the fine print carefully, and ask questions.
• Your interest rates may be higher.
• Look for hidden fees and add-ons like gap insurance and extended warranties.
• Often, you’ll have a choice between the special financing offer or a cash rebate. It could be better to pass on the dealer financing, take the rebate, and finance the car with your credit union. For details, see Special Rate or Dealer Rebate.
• Some dealers offer low-rate financing using an "add-on" rate. The advertised rate may seem low, but interest is calculated upfront based on the total loan amount, which means your actual cost over time can be much higher than a traditional loan.

Other financing sources

You can also get your loan through a bank or a finance company. Getting your loan from these sources could cost you more, so compare your options carefully.

Knowing your options can help you feel confident that the loan terms you accept are the best ones. Doing a little research ahead of time can help with this. Make sure you’re familiar with the car buying process from start to finish so there are no surprises along the way.

If you’re still on the fence about what you can afford, it’s a good idea to review the costs of owning a car so you can find a great new or used car for your budget.