If you’re looking to buy a car or are unhappy with your current car loan, you may want to consider a credit union for your car loan. As nonprofit financial institutions, credit unions often offer loans with more favorable terms, including lower interest rates and fees, than for-profit lenders. Here’s a look at the best credit unions for car loans to help you make an informed borrowing decision.
Our recommendations
Best for lower interest rates
Best for lower interest rates
PenFed
Loan amount
Up to $150,000
Term
36, 48, 60, 72, or 84 months
PenFed is a nationwide credit union anyone can join. To become a member, all you need to do is open a PenFed savings account and deposit $5. PenFed offers the lowest borrowing costs from our list, with an annual percentage rate (APR) as low as 4.74% for a 36-month loan. Auto loans are available for up to 125% of the car’s value, with a maximum loan amount of $150,000.
PenFed auto loans are available for both new and used vehicles. You can get pre-approved with a quick online application, and the pre-qualification process doesn’t impact your credit score. If you’re still shopping for a vehicle, you can use the PenFed car buying service powered by TrueCar, which may help you find the best vehicle at the best price.
Pros:
- Low interest rates
- High borrowing limits
- Car buying assistance is available
Cons:
- Few branch locations
- Requires membership
- Some online systems feel dated
Best for car buying options
Best for car buying options
Consumers Credit Union
Loan amount
$1,000 to $100,000
Min. credit score
No minimum if you complete Credit Smart program
Joining Consumers Credit Union is easy. You just need to pay a $5 membership fee, which may be reimbursed. If you’re still looking for a car, you may find a good deal through the credit union’s relationship with TrueCar and Enterprise car rental. Consumers Credit Union also offers GAP coverage to ensure your loan is fully repaid by insurance if a major accident leads to a total loss and a 24-hour emergency repair service.
Interest rates vary depending on the loan term and age of the vehicle. The best rates are for cars from 2022 or newer with loan terms of 60 months or less. However, older vehicles are also supported, and you may be approved for a loan term of up to 84 months. The lender also offers some borrowers the option to skip up to two payments per year.
Pros:
- Terms from 0 to 84 months
- Partnerships with TrueCar and Enterprise for auto buyers
- Ability to skip a monthly payment or two annually
Cons:
- Not the lowest interest rate
- Long loan terms come with relatively high costs
- Automatic payments are required for the best rate
Best for military households
Best for military households
Navy Federal Credit Union
APR
.54% (new vehicles up to 36 months)
Loan amount
$30,000 to no maximum disclosed
Min. credit score
Not disclosed
Navy Federal is a credit union serving households with ties to the armed forces, Department of Defense, or National Guard. If you’re a member, you can access various banking and lending products, including auto loans. As a military-focused credit union, Navy Federal understands military households’ unique challenges, including deployments and frequent moves.
Navy Federal has 350 branches worldwide, primarily near large military populations. You can also join and manage an account online.
Navy Federal auto loan rates are very competitive, with APRs as low as 4.54% for loans lasting up to 36 months. The credit union also offers longer loan terms of up to 96 months, though interest rates and costs increase dramatically with longer terms. Members can borrow up to 100% of the vehicle value for eligible loans, meaning no down payment is required. Navy Federal Credit Union could be a good car loan option if you’re active military or a veteran.
Pros:
- Low rates for shorter-term loans
- No down payment loans are available
- Familiar with common military challenges
Cons:
- Longer-term loans have much higher interest rates
- Long lending terms lead to higher total interest costs
- Small branch footprint
Best for banking and lending combo
Best for banking and lending combo
First Tech
APR
6.80% (new cars for residents in California)
Loan amount
$1,000 to no maximum disclosed
Min. credit score
Not disclosed
First Technology Federal Credit Union, also known as First Tech, is open to anyone nationwide. If you don’t work for one of its tech partner companies, live with or are related to a member, work for the state of Oregon, or live or work in Lane County, Oregon, there are other ways to join, including becoming a member of the Computer History Museum or the Financial Fitness Association. The credit union offers excellent high-yield checking and savings account options with low fees as well as competitive car loan rates.
Loan APRs vary by state, so you’ll have to check the website to find what you may have to pay. The lowest APR of 6.50% is available to Californian residents. In various other states, the APR goes up to 8.40%. Terms range from 12 to 84 months and there is an option to defer your first payment for 90 days, though this may result in you paying a higher APR and more interest.
Pros:
- Membership is available to anyone nationwide
- Low-fee, high-interest bank accounts are offered
- Option to delay first payment for up to 90 days
Cons:
- Lower interest rates may be available elsewhere
- 90-day payment delay can lead to higher rates and costs
- Different rates in different states
Best for Interest rate discounts
Best for Interest rate discounts
DCU
Loan amount
No maximum disclosed
Min. credit score
Not disclosed
There are, however, discounts and other perks available. DCU offers up to 0.50% off standard rates for Plus and Relationship members when enrolled in automatic payments. You can get an additional 0.25% off if you have a fully electric vehicle. Moreover, payments are not required for the first 60 days after a new loan is issued, and you may be able to borrow more than the car’s value with qualifying credit, up to 130% loan-to-value.
Pros:
- Discounts up to 0.75% for qualifying members
- No payment required for 60 days
- You may be able to borrow more than the car’s value
Cons:
- Lower rates are available elsewhere
- EV and other memberships are required for all discounts
- More challenging membership requirements than other credit unions
Best credit unions for car loans compared
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Up to 125% of vehicle value up to $150,000 |
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5.99% (0 to 60 months/car must be from 2022 or newer) |
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4.54% (new vehicles up to 36 months) |
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Banking and lending combo |
6.80% (new cars for residents in California) |
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*APRs listed are current as of June 30, 2024, and are subject to change.
Methodology
To choose the best credit unions for car loans, we reviewed more than a dozen lenders, focusing on finding diverse and unique options that work well for various borrowers needs. We considered interest rates and fees as the top criteria for our best lenders list. Other factors we looked at included in-person customer service options, loan terms available, and the ease of getting an auto loan.
How to choose the best credit union for a car loan
In most cases, the best credit union (for a car loan) is the lender offering the lowest interest rates and fees. To compare loans, look at the APR, which helps you compare loan costs inclusive of interest rates and fees, such as origination fees. It’s best to avoid lenders with prepayment penalties or high fees for late and returned payments if you’re concerned you may not be able to pay by the due date.
Alternatives to getting a loan from a credit union for your car payments
Credit unions aren’t your only option if you want to buy a car. There are other types of lenders and means to finance your purchase.
Online lender
Online lenders offer a convenient, fast option to secure auto financing using your computer or smartphone. They allow you to apply from home or any other convenient location and often provide competitive rates, especially for borrowers with strong credit and quicker loan approval times.
Traditional bank
Banks are a tried-and-true option for auto loans. They offer the security of dealing with established financial institutions and, in many cases, the opportunity to visit a branch and discuss your situation in person. They may also offer benefits to existing customers, such as lower interest rates or reduced fees.
Use your savings
Using your savings to purchase a car outright avoids the need for a loan and the accompanying interest charges, saving you money in the long run. This option requires discipline to save the necessary funds but grants freedom from monthly payments and interest expenses.
More about car loans
What is an auto loan, and how does it work?
An auto loan is a type of financing used to purchase a vehicle. The borrower agrees to repay the principal and interest over a set period. The loan is secured against the vehicle, meaning the lender can repossess the car if payments are not made as agreed. Auto loans are often cheaper than unsecured personal loans because the bank is protected by the vehicle’s value.
Auto loans: Pros and cons
Pros:
- Enables the purchase of a vehicle without the need for full upfront payment
- Potentially offers competitive interest rates compared to other loans
- Can help build credit if payments are made on time
Cons:
- Interest charges increase the total cost of the vehicle
- Risk of repossession if payments are missed
- Potential for being “upside down” on the loan, meaning owing more than the car’s value
Types of auto loans
There are two types of auto loans: direct loans, where a borrower gets a loan directly from a financial institution, and indirect loans, where the auto dealer arranges financing through a third party. Each type offers different rates, terms, and conditions.
How to apply for an auto loan
Applying for an auto loan typically involves submitting a financial application online, at a bank or credit union, or through a car dealership. The process requires documentation, such as proof of income, employment, identity, and credit history, to assess the borrower’s ability to repay the loan.
TIME Stamp: Credit unions can be a good place to shop for auto loans
Without a mandate to earn profits for shareholders, credit unions are often an excellent option for car buyers looking for an auto loan. Loans may lead to higher costs than paying for the car fully with cash. However, a credit union may be your best choice if that’s not an option and you require outside help. Just remember to shop around for the best rates and fees.
Frequently asked questions (FAQs)
What credit score do credit unions use for auto loans?
Credit unions typically use FICO scores to evaluate eligibility for auto loans, with the best rates offered to those with scores of 720 and above.
Which finance company is best for cars?
The best finance company for a car loan depends on your credit profile and needs. Usually, credit unions and online lenders offer the most competitive rates and terms.
How long does it take to get approved for a credit union car loan?
Approval times can vary, but many credit union car loans can be approved within 24 to 48 hours of submitting the application.
What happens if I miss a payment on my car loan?
Missing a payment on your car loan can lead to late fees, impact your credit score, and, if consistently missed, result in the repossession of the vehicle.
The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.