What auto loan is right for you?
This article was written for our sponsor, RTP Federal Credit Union
After months of skyrocketing car prices, dealerships have more inventory and prices are dropping. In fact, this year may see up to a 5% drop in new car prices, and as much as a 20% drop in used car prices, according to JPMorgan.
If you’re considering buying a new or new-to-you car, here is what you need to know about your loan options.
New auto loan
New car loans are for brand new cars. While you can get financing through the dealership, you will usually get a better deal through a credit union, or online lender.
"Our new auto loans are for vehicles that are current model year with less than 10,000 miles," said RTP Federal Credit Union Sales Manager Ed Kinnaird. "Vehicles that do not fit in this criteria would be considered used."
Used auto loan
The biggest difference between a new and used auto loan is the amount of money you’re borrowing.
"Our only limitation is that the vehicle must be listed in the J.D. Power/NADA valuation system," said Kinnaird. "However, the repayment terms and interest rate offered may be impacted by vehicle age and/or mileage."
Used car loans are typically shorter, so you may save on interest.
"Used vehicles have a slightly higher rate, but we still offer flexible terms so the customer can find a budget-friendly monthly payment," said Rob Ruppenkamp, Lending Director at RTP Federal Credit Union.
First-time auto loan
credit union are helpful if you’re a first-time buyer and may have a difficult time getting a loan. This loan doesn’t require a co-signer.
"We offer a competitive interest rate for a customer with little or no credit history," said Ruppenkamp. "The approved rate is almost always lower than the rate a car dealer would offer for the same customer."
Direct lending loan
Credit Union Direct Lending loans, called CUDL loans, are offered by credit unions to give you the convenience of car shopping when the need arises.
"This program allows our members to get pre-approved online and enables them to visit a participating CUDL dealer with the financing already approved," said Ruppenkamp. "This saves valuable time and money for our members since they don’t have to go through a loan approval process at the dealer. This program also allows members to purchase vehicles in the evening and weekends — even if RTP credit union branch locations are closed."
Private party auto loan
Oftentimes, you can find a better deal on a used car from a private seller.
"A private party loan is one in which the member is purchasing a vehicle directly from a private owner rather than a dealership," said Kinnaird. "The current owner may hold the title free and clear or have the vehicle financed at another institution. Private party sales are typically cheaper compared to the same one sold by a dealership due to associated costs, and private sellers are often more open to negotiation."
Whether you find it from a stranger or a friend, make sure the car is sound.
"Members are strongly encouraged to have the vehicle inspected by a licensed mechanic before financially committing to the purchase," said Kinnaird.
Lease buyout loan
If you like a car you’re leasing, you can buy it with the help of your lender.
"Because the member is purchasing the vehicle directly from their leasing company, there is no need to have a car dealer involved in processing the purchase," said Ruppenkamp. "At the very least, the customer avoids having to pay the standard dealer documentation fee, which can run from $500-$900. We do not charge fees on a lease buyout."
Auto loan refinance
If you already have a loan and want a better interest rate, you can refinance.
"Benefits of refinancing a car loan can include lowering your interest rate, lowering your monthly payment or shortening your loan term — sometimes all three," said Kinnaird.
Whatever type of loan you choose, you can get expert help with the process from beginning to end. Learn more and start your application at rtpfcu.org.
This article was written for our sponsor, RTP Federal Credit Union
