What Car Buyers Should Know Before Financing Their Next New or Used Vehicle
There’s more to buying a car than just choosing the right new or pre-owned vehicle. How you decide to pay for it can be an equally important decision. Although some car buyers do have adequate cash to buy a vehicle outright, the majority of car shoppers, particularly those purchasing new cars, will decide to finance. The choice then becomes whom to get your auto loan from.
Financing with the dealership where you’re buying your car might seem like the easiest option, but there can be some serious downsides. They may try to entice you with various incentives or discounts, but it’s always important to read the fine print and consider your other options.
Beginning your car shopping journey with auto loan pre-approval from a credit union you trust can provide a number of benefits, from nailing down your budget early to having extra leverage in negotiations.
Should You Rely on Dealership Financing?
Dealerships often emphasize convenience when it comes to financing—but convenience can come at a cost. Some dealers mark up interest rates or steer you toward loans with less favorable terms to pad their own bottom line. While they may offer promotional rates on specific new models, those offers aren’t always available to all borrowers.
Financing is an important source of revenue for dealerships. They have had a lot of practice convincing buyers to make quick decisions before they’ve had a chance to compare options. Being cognizant of their motivations and firm in your desire to consider alternative financing can leave you in a better negotiating position.
Pre-approval can also give you leverage in price negotiations with the dealership. Knowing exactly how much you can borrow gives you a clear ceiling on the purchase price of a car. Salespeople need to make sales, and they may be willing to reduce the purchase price to your pre-approved limit to get you into a vehicle.
Why a Credit Union Auto Loan Might Be the Smarter Choice
Credit unions like Ouachita Valley FCU are not-for-profit, which means they return earnings to members through lower rates and better service. This means auto loans from credit unions often come with:
Competitive interest rates
Flexible repayment terms
Local decision-making and faster approval processes
A more personal, member-focused experience
For current members, working with a credit union can feel a lot more transparent and tailored than financing through a dealership or big national bank.
You might also be eligible to take advantage of special financing offers. For example, Ouachita Valley FCU is offering 1% cash back and 90 days with no payment on auto loans until May 9, 2025.*
Credit unions run various incentives on loans and refinancing throughout the year. Even if you missed this one, you can rest assured another will be available in the not-too-distant future.
*Membership restrictions apply. To qualify for offer for refinance, loan must be from another financial institution. Offer for qualified buyers. Interest accrues from date of the loan. APR = Annual Percentage Rate. 1% cash back based on purchase price of vehicle, limit $500. See credit union for details. Offer ends May 9th.
Do New Car Loans Come With Better Terms?
In general, new car loans tend to offer lower interest rates than used car loans. That’s because lenders see new vehicles as less risky—they have depreciated less, they come with warranties, and they’re less likely to have hidden mechanical problems. Lower rates can lead to lower monthly payments or reduced total interest.
Used car loans often have higher rates to offset the added risk of age and use. However, because used vehicles usually cost less overall, your monthly payment might still be lower than it would be for a new car, depending on the price of the vehicle, your down payment, the loan term, and the interest rate.
Common Loan Terms and What to Consider
Most auto loan terms fall between 36 and 72 months. Shorter terms usually mean higher monthly payments but lower total interest. Longer terms reduce your payment but increase the amount you pay over time.
When choosing a term, ask yourself:
How much can I comfortably afford to pay each month?
Will I end up owing more than the car is worth halfway through the loan?
Am I likely to keep this car for the full loan term or longer?
Balancing monthly affordability with total interest paid is key. If you stretch your loan too far just to lower your monthly bill, you might end up upside down on the loan, or stuck with a car you no longer want.
When Should You Finance Instead of Paying Cash?
Paying cash might feel satisfying, but there can be benefits to financing, even if you have the cash to buy a vehicle outright. Financing allows you to preserve savings for other goals or emergencies. It may also help you build or strengthen your credit score if you make on-time payments.
That said, paying cash might still be the preferred option for people with the cash on hand, particularly for those who:
Want to avoid monthly payments altogether
Don’t want to pay interest if they can avoid it
Are buying an older or inexpensive used vehicle that doesn’t qualify for low financing rates
Ready to Explore Your Financing Options in Northeastern Louisiana?
Financing a car doesn't have to be overwhelming. Determine what you can afford to spend each month, how long you plan to keep the vehicle, and whether you're better off with a lower rate or lower price. Ouachita Valley FCU is committed to helping members find auto loans that fit their finances and life. Learn more about your options on our auto loans page or call us at 318.387.4592.
