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How Should I Finance My New Car?

Learn more about auto financing terms and tips to better prepare you for your journey with financing a new vehicle

Editorial Note: Articles published are intended to provide general information and educational content related to personal finance, banking, and credit union services. While we strive to ensure the accuracy and reliability of the information presented, it should not be considered as financial advice and may be revised as needed.

How To Finance Your New Car

Buying a new car is one of the biggest purchases you’ll make. After researching, test driving and finding the car of your dreams, you are finally ready to bring it home!

While a new set of wheels can be exciting, remember that a car purchase also involves a financial commitment. It’s important to know just how much you’ll be paying and what you can do to influence those payments.

There are various ways to find auto finance options that are right for you. Learn more about different finance options, compare loan offers and tips to afford your new car.

Obtain Financing Before You Shop

Do your research and compare your financing options to ensure you receive the most favorable loan terms and pay less for your car over time. Important car loan terms you should understand includes:

  • Annual Percentage Rate (APR) - The annual percentage rate, also known as APR, refers to the loan’s interest rate as a yearly metric. You can use the APR percentage to calculate how much it costs to borrow money over time and serves as a great starting point for how much you will pay to take out a loan.
  • Loan Term - The amount of time you have to repay the loan in full is referred to as the loan term. Keep in mind that a shorter loan term will make your monthly car payments higher, but fewer payments will need to be made.

Get financing from a credit union instead of waiting for the dealership! With low interest rates and flexible payback options, credit unions make applying for an auto loan easy. Financing tools such as an auto loan calculator can help determine the right length of loan term that fits your needs and budget.

Compare Loans

To obtain various financing offers visit car dealers, credit unions or banks, and online lenders. You can then compare your loan offers and use them as leverage to obtain the best deal! Here's some information about each source of lending:

  • Car Dealerships - Car dealership financing departments specialize in providing car loans from multiple lenders. With this option, you can enjoy the convenience of purchasing and financing your new car in one location. You may also take advantage of dealer financing low introductory interest rates, generous trade-in values, and other incentives. However, you will probably need excellent credit to qualify for the low interest rates.
  • Online Lenders - Complete car loan applications online if your credit is not great. Based on your credit history and score, online lenders can provide you with an interest rate and a maximum loan amount they will lend you. Use this information to compare car loans from other sources and ensure you select the right loan for your needs.
  • Credit Unions or Banks - Visit local credit unions and banks to inquire about a new car loan. You may qualify for a low-interest car loan if you already hold accounts or otherwise do business at the credit union or bank. As an extra incentive, credit unions, like Listerhill, offer personalized service, feature user-friendly loan applications, and support the local community.

At Listerhill Credit Union, we are here to help you find an auto loan that works best for you, without the hassle. Skip the application fee and borrow up to 100% of the vehicle’s cost. Pay at a pace that is best for you with our payment terms up to 75 months.

Apply For An Auto Loan With Listerhill Credit Union

Maximize Your Existing Vehicle

Turn your existing car into cash when you sell it privately or trade it in at the dealership. Use the cash from this sale to cover a portion of your new car’s cost. If you wish to trade in your existing car, first check Edmunds or Kelley Blue Book to see how much your vehicle is worth.

Take that estimate and any maintenance or upgrade records you have for your car to the dealer. This information could increase your vehicle's trade-in value and reduce the total cost of your car loan.

Increase Your Down Payment

Most car dealers require buyers to put some money down before they complete financing paperwork. Try to pay at least 20% of the car’s price as a down payment. You’ll owe a lower monthly payment and save interest when you increase your down payment amount.

Choose The Right Repayment Term

Car loans typically take three to seven years to repay. Choose a short term, if possible, to reduce your overall costs and avoid owing more money than your car is worth. Although your monthly payments will be higher on a short-term loan, calculate the costs for a variety of term lengths and number of months. You can then select the option with affordable monthly payments and an acceptable total cost.

Calculate The Extras

In addition to the cost of your new car, you’ll owe a variety of extra fees and costs. Ask the dealer to verify the exact amount of common fees such as:

  • Sales tax
  • Vehicle registration
  • Document fees
  • Extended warranty costs
  • Aftermarket optional accessories

You could save money by negotiating these fees. Also pay cash for these extra costs rather than financing them - this step allows you to save money and still obtain reliable transportation.

Consider Gap Insurance

In the event of a car accident, GAP (Guaranteed Auto Protection) insurance will pay the difference between your new car’s value and the loan amount. This insurance product can give you peace of mind, especially if you owe more than the car’s worth.

Before you select or finance gap insurance, review the loan’s terms. If you put enough money down and only finance your car for three years, there is a chance you will not owe more than your car is worth, making GAP insurance unnecessary.

Read The Contract Carefully

The dealer will give you dozens of papers to sign. This paperwork contains details about the loan terms, vehicle condition, and your repayment contract. Take your time and review each page carefully. Don't be afraid to ask questions if you don’t understand terms or other details before you sign!

Finance Your New Car With Listerhill Credit Union

A new car provides reliable transportation, and it can be a wise financial investment if you finance it the right way. Follow these tips as you save money and afford your new ride!

To get started today, contact Listerhill Credit Union to drive away knowing you made the best financial decision.

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Frequently Asked Questions

  • What happens when federally insured credit unions merge?

    If a member has accounts in credit union A and credit union B, and credit union A merges into credit union B, accounts of credit union A continue to be insured separately from the share deposits of credit union B for six months after the date of the merger or, in the case of a share certificate, the earliest maturity date after the six-month period. In the case of a share certificate that matures within the six-month grace period that is renewed at the same dollar amount, either with or without accrued dividends having been added to the principal amount, and for the same term as the original share certificate, the separate insurance applies to the renewed share certificate until the first maturity date after the six-month period. A share certificate that matures within the six-month grace period that is renewed on any other basis, or that is not renewed, is separately insured only until the end of the six-month grace period.

  • What happens if a federally insured credit union is liquidated?

    The NCUA would either transfer the insured member's account to another federally insured credit union or give the federally insured member a check equal to their insured account balance. This includes the principal and posted dividends through the date of the credit union's liquidation, up to the insurance limit.

  • If a credit union is liquidated, what is the timeframe for payout of the funds that are insured if the credit union cannot be acquired by another credit union?

    Federal law requires the NCUA to make payments of insured accounts "as soon as possible" upon the failure of a federally insured credit union. While every credit union failure is unique, there are standard policies and procedures that the NCUA follows in making share insurance payments. Historically, insured funds are available to members within just a few days after the closure of an insured credit union.

  • What happens to members with uninsured shares?

    Members who have uninsured shares may recover a portion of their uninsured shares, but there is no guarantee that they will recover any more than the insured amount. The amount of uninsured shares they may receive, if any, is based on the recovery of the failed credit union's assets. Depending on the quality and value of these assets, it may take several years to conclude recovery on all the assets. As recoveries are made, uninsured account holders may receive periodic payments on their uninsured shares claim.

  • What happens to my direct deposits if a federally insured credit union is liquidated?

    If a liquidated credit union is acquired by another federally insured credit union, all direct deposits, including Social Security checks or paychecks delivered electronically, will be automatically deposited into your account at the assuming credit union. If the NCUA cannot find an acquirer for the liquidated credit union, the NCUA will advise members to make new arrangements.

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