Where to get the Best Interest Rate for your Auto Loan

Many prospective new car loan borrowers are highly perplexed concerning the differences between the advantages offered from banks, credit unions and dealerships. Understanding these differences can save you thousands of dollars in interest charges alone over the course of your automobile loan contract. Getting the best new car loan terms has rules. It definitely pays to arm yourself with knowledge.

Should I use a bank, credit union or the dealership to get the lowest new car interest rates?
While dealerships are definitely worth considering because they frequently offer luring incentive plans for new car loans, most people will still end up either obtaining their new car loan from a bank or credit union. There are three main very important differences between these types of lending institutions. Let's look closer:

The differences between banks and credit unions concerning new car loans:

Ownership:
It's important to realize that the members of a credit union are all part owners of that organization. While this will not allow you to access their computers or enter their vaults, it does afford you the luxury of being looked upon as an individual of worth - instead of just a number.

Profit Vs. Not-for-Profit:
In general, you will find that credit unions offer superior interest rates than do banks. The reason is simple: profit margins. Banks have predetermined profit margins that they strive diligently to meet - or very happily exceed. Credit unions, been member-owned, take their profits and divide them as dividends amongst their members. This is also why you will find banks constantly inventing previously unheard of policies and fees. They do so to increase their levels of profit.

Credit Unions Are Exempt from State and Federal Taxation:
Since 1934, when FDR initiated the Federal Credit Union Act, major banks have been at war with them. Because credit unions do not exist for profit generation, and are structured very cooperatively, they are not subjected to most taxation on state and/or federal levels. For these reasons, banks are constantly trying to do away with credit unions - or at least to severely limit the rights of individuals to join them.

However, it is fortunate that the banks have mostly failed to do so. The truth is that almost every American is able to join one credit union or on other. Membership may be based on something as simple as your postal address, your place of employment or a particular professional association that you may be associated with.

Rate Comparisons for New Car Loans Between Credit Unions and Banks:

• The average APR for a 48-month new car loan is 5.46% at credit unions and 6.91% at banks.
• The average APR for a 48-month used car loan is 5.72% at credit unions and 7.50% at banks.
• The average APR for a 36-month unsecured new car loan at credit unions is 10.60% and 12.47% at banks.

Understanding the differences between credit unions and banks when considering a new car loan can save you thousands of dollars in interest charges alone. Of course it is always advantageous to consider the incentive plans offered by dealerships as well. However, as a rule of thumb, your best bet for a new car loan is to deal with your local credit union.