Pros and Cons of Buying a Used Car | People's Community Federal Credit Union - Credit Union & Banking Services (2024)

FAQs

Is it better to get an auto loan through your bank or credit union? ›

Though you can take out loans from banks or online lenders, an auto loan from a credit union is your best bet for getting the right terms for your needs. Plus, they work essentially the same way, so there won't be any surprises when it comes to borrowing or paying it back.

The Bottom Line. Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

Generally, a good APR for a car loan might look something like this: Excellent Credit (750+): 3% or lower for new cars, 4% or lower for used cars. Good Credit (700-749): 4-5% for new cars, 5-6% for used cars. Fair Credit (650-699): 6-7% for new cars, 7-8% for used cars.

Most lenders use FICO, which ranges from 300 to 850. VantageScore is less common but still ranges from 300 to 850. Both scores use a mix of your credit history, amount owed, balances and available credit — just weighted differently. Some auto lenders also use a version of the FICO score called FICO Auto Score.

Never go to a dealership acting rushed, even if you need a car immediately—they'll take advantage of it. Many salespeople say they won't pressure or rush you into buying, but they usually do it anyway. If you feel the sales process is moving too fast, tell the salesperson that you'll come back at another time.

For decades, bankers have objected to the tax breaks and sponsor subsidies enjoyed by credit unions and not available to banks. Because such challenges haven't slowed down the growth of credit unions, banks continue to look for other reasons to allege unfair competition.

Which is safer, banks or credit unions? ›

One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.

Fewer requirements: Once you are a member of a credit union, it can be easier to get a car loan than from a traditional bank, especially if you have a poor credit score. More flexible terms: Credit unions can be more flexible than banks when it comes to repayment terms and tend to charge lower fees.

Credit Unions are the only democratically run financial institution. A federal credit union is member-owned and controlled. Member's interests are represented by a volunteer board of directors drawn from the membership and elected by the membership.

Like banks, credit unions can fail, but their failure is far less common and the financial fallout is mild by comparison. In 2023, for example, five bank failures represented a total of $549 billion in assets, and the First Republic Bank closure in 2024 impacted $6 billion alone.

Most credit unions, including the Credit Union of Southern California (CU SoCal), have more flexible lending requirements than traditional banks. This is because credit unions are member owned and non-profit, and can offer quick approvals and competitive rates that are lower than bank rates.

Americans are having a harder time getting approved for auto loans, as banks worry over the risk of defaults at a time when high interest rates and elevated car prices are squeezing budgets. With borrowers struggling to make their monthly car payments, banks are responding by tightening credit standards.

Because of their nonprofit nature, a credit union may be more willing to accept riskier borrowers or offer better borrowing terms than banks and finance companies can. Each credit union sets its own lending criteria and determines the interest rates and fees it charges, within legal limits.