The Best Credit Union Auto Loans
Thinking about buying a car? This could be the perfect time to join a credit union. As member-owned, nonprofit organizations, credit unions often offer lower annual percentage rates (APRs) than banks and online lenders. But the first step in securing a credit union auto loan is joining, and your eligibility may hinge on where you work or live.
Credit union auto loan rates
There are nearly 5,000 federally insured credit unions in the country. The ones below aren’t necessarily the best or the cheapest. They are, however, the largest in the U.S., by assets. Although this table isn’t all inclusive, it can give you an idea of how credit union auto rates tend to fare.
| Credit union | Starting APR (new vehicles) | Starting APR (used vehicles) | Membership requirements |
|---|---|---|---|
| Navy Federal Credit Union | 4.09% | 4.99% | Military or Department of Defense affiliation |
| State Employees' Credit Union (NC) | 5.50% | 6.50% | State of NC employees or retirees, federal employees assigned to NC state agencies, employees of select NC-based businesses |
| PenFed Credit Union | 4.44% (with car-buying service) | 6.49% (with car-buying service) | Open to all |
| BECU (Boeing Employees Credit Union) | 6.49% | 6.99% | Open to all who make a donation to an affiliated organization |
| Schoolsfirst FCU | 5.99% (with autopay) | 6.09% (with autopay) | Affiliation with an eligible school, college students enrolled in an eligible education program |
| Golden 1 Credit Union | 6.79% | 6.94% | Californians, members of select employee groups |
| Alliant Credit Union | 5.19% (with discounts) | 5.71% (with discounts) | Open to all who join the Foster Care to Success organization |
| America First Credit Union | 6.74% (with autopay) | 6.74% (with autopay) | Affiliation with certain parts of UT, NV, AZ, OR, ID or NM, food industry workers in UT, employees of affiliated businesses |
| Mountain America Credit Union | 6.49% (with autopay) | 6.49% (with autopay) | Residents of certain areas in UT, employees and volunteers of affiliated businesses |
| First Technology Federal Credit Union | Varies by state | Varies by state | Open to all who join the Computer History Museum or Financial Fitness Association |
Note that every credit union has a different definition of new and and used. For instance, Navy Federal Credit Union considers any model year as used if it has more than 30,000 miles. Please check with the credit union directly for more information.
How do credit union auto loans work?
Credit union auto loans work the same as other types of auto loans.
Rather than paying for your new vehicle in full, you take out a loan. You may also need to make a down payment. Then, you pay back your loan (plus interest) in monthly installments. You’ll usually get three to six years to pay off your loan, but this can vary.
Also, vehicle loans are secured. In other words, your car serves as collateral. If you don’t keep up on your loan payments, the credit union can repossess your car.
Credit union auto loan pros and cons
Credit unions can be a great place to get many types of loans. Still, everyone has different needs, so weigh the pros and cons before joining.
| Pros | Cons |
|---|---|
Offers competitive rates. Compared to other types of lenders, credit unions tend to have the lowest APRs. Perks. Credit union membership usually comes with benefits such as discounts on retail and travel. Not-for-profit and member-owned. Generally, credit unions focus on its members’ financial wellness and personalized service. | Eligibility. Many credit unions are only available to a narrow group of people. If a credit union has open eligibility, it may require a donation to an affiliated organization. May require a hard credit pull. Some credit unions don’t offer prequalification or preapproval. Limited web footprint. Small credit unions may not have the same technological capabilities as big banks. |
How to get a credit union auto loan
Getting a credit union auto loan is similar to getting a car loan from an online lender, but with one extra step — joining.
Check your budget and credit score
No matter where you get your loan, it’s essential that you first make sure you can afford to buy a car. Use the 20/4/10 rule and our car affordability calculator to see how a new vehicle could affect your bottom line. Also, consider related costs such as insurance.
Additionally, you’ll want to get your free credit score. Credit unions (and other lenders) reserve their lowest rates for buyers with good to excellent credit (or 670 and above). Checking your credit score now can help you understand what APRs you could qualify for.
Review membership requirements
Before you get your heart set on a credit union auto loan, you’ll need to research what credit unions can join. You can usually find this information on the credit union’s website.
If you don’t meet membership requirements for any of your local credit unions, you may still have options. Some credit unions (First Tech, for instance) are available nationwide. However, you’ll still have to meet membership requirements.
Get preapproved
Getting an auto loan pre approval is more accurate than prequalification. It doesn’t guarantee approval, but it will help you know where you stand with the credit union. Preapproval can also give you leverage when negotiating car prices. With it, both you and the dealer will know exactly how much car you can buy.
If you meet the membership requirements for multiple credit unions, consider getting preapproved for each. That is, as long as you do so within 14 days. Preapprovals require a hard credit pull, but multiple pulls only count as one when conducted within 14 days.
Evaluate your offer(s)
Once you have your tentative loan offer, review it — but pay special attention to APRs, fees and loan terms. APR measures the total cost of your loan, including interest and fees. The lower the percentage, the less expensive your loan.
Your loan term is the length of time you have to pay off what you borrowed. The average loan term for a new car in the U.S. is 68.3 months. If you can, choose a shorter term. The longer your term, the lower your monthly payments will be but the more interest you’ll pay.
Join the credit union and get apply for your loan
Some credit unions allow you to get preapproved for a loan before becoming a member. But to finalize a loan, you’ll need to join. You can usually join online or over the phone.
Once you’re a member, you can formally apply. Here, the credit union will ask for your contact information and financial details. You may also need to send copies of your bank statements and your ID.
Frequently asked questions
Interest rates are constantly in flux. However, at the time of this writing, Navy Federal Credit Union has the lowest rates for both new and used vehicles. At least, out of the top 10 largest credit unions in the U.S., by assets.
If you don’t qualify for Navy Fed, PenFed is a credit union with open membership, and it tends to have competitive rates.
Credit union auto loans can come with plenty of benefits. Often, these include lower interest rates and members-only discounts. That doesn’t mean credit union auto loans are best for everyone.
Banks are more accessible. They don’t have strict membership guidelines, and they sometimes have a stronger online presence (such as a customer-friendly mobile app). You should weigh the pros and cons against your needs to find the lender that makes sense for you.
That depends on the credit union and your borrowing history. As nonprofit organizations, many credit unions focus on helping their members access loans, even those with imperfect credit. That doesn’t mean it’s guaranteed to approve you, though.
In addition to your credit score, the credit union will likely review other factors like your annual income and debt-to-income ratio. If you don’t meet its minimum borrower requirements, you may need to target bad-credit car loans, instead.