Coles In Car

What is Auto Financing?

What you need to know before buying your next car.

Everyone thinks about their next new car months before making a final purchase, but few people consider whom they should finance through or what that process will look like. Don't panic. Auto financing does not need to be stressful or confusing. Read below to learn more about what auto financing actually is and why you should care about it.

What is Auto Financing?

Auto financing is any sort of loan designed to help you purchase a vehicle.
When shopping for a new car, most people don’t have the cash needed to pay for the entire amount all at once. For this reason, many buyers will secure auto financing to fund their purchase.

With an auto loan, you make monthly payments based on the loan amount plus interest. Once the entire loan is paid off, you own the vehicle.

Financial institutions, such as banks and credit unions, offer auto financing to their customers and members. You can also get auto financing through car dealerships. Let's explore both options below.

Direct Financing (Financing with a financial institution you trust)

With direct financing, you have more options and more control over the financing process. This is because you are able to negotiate the loan’s terms directly with the lender. While this may be less convenient than dealership financing, you have a better chance of getting lower rates and a payment plan that works for you.

In addition, you can get pre-approved for financing before you even start car shopping. The advantage to pre-approval is you will have a good idea of how much you can afford before you even start shopping for a car.

Although it might not be instantaneous, we recommend applying for auto financing through a local financial organization that you know and trust before you begin car shopping so that you can plan your budget wisely.

Dealership Financing

If you choose to get auto financing from the dealership, you’ll start off by choosing a vehicle and then seeing what type of loan you qualify for. The dealership will forward your information to lenders they partner with to obtain quotes on rates. Then they’ll offer you the financing options they receive, and you’ll choose the loan that best fits your needs.

Be aware that if you opt for dealership financing the dealership may increase the rate to boost their own profit. If the quoted rate seems a little high, negotiate for a lower one. In many cases, you’ll still end up with a slightly higher rate than you’d get directly from a lender, but negotiating for a lower amount could help offset that.

How Auto Financing Loan Terms are Determined

After examining your financial information, your lender will determine what kinds of loan terms you qualify to receive. The different terms include the interest rate, loan life, and monthly payments.

Interest Rate

Your interest rate depends largely on your credit score. The higher your credit score the lower the rates you’ll be offered. The rate may also be increased or decreased based on other loan terms, such as the loan’s life.

Life of the Loan

The life of the loan is simply the duration. Most auto loans last between 36 and 84 months, or three to seven years. Longer loan terms mean lower monthly payments, but ultimately you’ll pay more in interest. A longer life may also mean a higher annual percentage rate (APR) in general, further increasing the end costs.

A shorter auto loan life will typically have lower rates, and you’ll pay less in interest since the loan is paid off sooner. However, you’ll have higher monthly payments; so, if your monthly income is low, you may not qualify for shorter loan lengths.

Monthly Payments

Your monthly payments are calculated based on the total amount of the loan, the loan life, and the interest rate. The total plus interest is divided by the number of months in the loan for a consistent monthly payment.

Those with a higher monthly income can tackle larger payments, whereas those who have more limited funds will need financing with lower monthly payments and a longer loan life.

Auto Financing - Final Considerations.

Auto financing seems intimidating, but we promise it's more approachable than you think. Just remember to look at financing options with a financial institution you trust. Whomever you choose will be servicing your loan, so you want a lender that provides quality member service in addition to favorable loan options.

Shop around to find the institution you’re most comfortable with and take your time building an auto financing plan that is right for you.

Learn more from these auto financing resources:



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Frequently Asked Questions

  • How can I access my Listerhill accounts without a nearby branch?

    If you live in Alabama or in south central Tennessee but don't have a Listerhill branch location nearby, there are still plenty of ways to access your accounts. You can use our online banking, mobile banking app, and cards app to access your accounts from your devices. You can also take advantage of our CO-OP Shared Branches for easy access to your money wherever you are. If you need to get in touch, we're always one call away.

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  • The Great Giveback Official Rules

    1. Eligibility: No purchase or obligation necessary to participate and win. All participants must be 19 years of age or older at time of contest participation. Employees of Listerhill Credit Union are not eligible to register for the contest.

    2. How To Enter the Contest: All Listerhill members who have consumer loans in good standing, (subject to limitations below) are automatically entered. Anyone who takes out a new loan with Listerhill Credit Union, or refinances a loan from another lender with Listerhill Credit Union (subject to limitations below) will automatically be entered to win. Limit of one entry per loan.

    NO PURCHASE NECESSARY: To enter the contest without a loan, send a self-addressed, stamped envelope to: Listerhill Credit Union, P.O. Box 566, Sheffield, AL 35660, Attn: Great Giveback Contest Entry. Limit one entry per person. Written entries must be received no later than July 3, 2021.

    Listerhill Credit Union will not be responsible for incomplete, lost, late, misdirected or illegible entries or for failure to receive entries. All entries become property of Listerhill Credit Union and none will be returned. Any questions regarding the number of entries submitted shall be determined by Listerhill Credit Union in its sole discretion, and Listerhill Credit Union reserves the right to disqualify any entries by persons determined to be tampering with, violating, or abusing any aspect of the contest.

    3. Contest Entry Requirements: In the event the Credit Union, in its sole discretion, determines that any Entry contains content that does not comply with these Official Rules or does not otherwise comply with regulatory guidelines, Credit Union reserves the right to disqualify the entry.

    4. Determining the Winner: A Credit Union employee will select at random four (4) $500 winners (one per day July 12-15) and one Grand Prize Winner from all entries received on July 16, 2021. You do not have to be present to win.

    5. Prizes: $500 Cash Prize: the Credit Union will award four (4) members with $500 cash each. Grand Prize: The Credit Union will pay up to $25,000 toward your loan with Listerhill Credit Union, or combination of loans. No loan payments will be made to loans with any other lender. No cash equivalent provided, and the total prize amount may be less depending on the outstanding amount of loan balance(s) with Listerhill Credit Union. In no event will the prize awarded exceed the total amount of the winner’s outstanding balance of qualifying loans with Listerhill Credit Union. Federal, state and local taxes are the sole responsibility of the winner. IRS regulations require the Credit Union file a 1099 on behalf of the winner.

    A Credit Union employee will call the prize winners and the prize winners will be called up to five times during regular business hours at number provided on entry form and will leave no messages. Failure to reach winner during these calls may result in disqualification of winner, forfeiture of his or her interest in all prizes, and selection of a substitute winner drawn from the drum. Winner will be required to schedule a time, at least 48 hours in advance, to visit Listerhill Credit Union, located at 4790 2nd Street, Muscle Shoals AL, 35661 in person, during regular business hours within seven (7) days of being notified to claim prizes by providing proof of eligibility for prize won and completing and signing an affidavit of eligibility and a liability and publicity release. Failure of any Winner to timely contact the Credit Union, visit the above Credit Union office in person and sign and return any required affidavit and release, or to claim a prize or comply with any term or condition of these Official Rules, will result in drawing Winner's disqualification and the forfeiture of his or her interest in the prize. Winners may waive their right to receive prizes. Prizes are non-assignable and nontransferable. No substitutions allowed by winner.

    6. To be eligible to win, all loans must be in good standing (not more than 30 days past due at the time of drawing. Eligible loans are limited to auto loans (no indirect dealer loans), personal loans (no loans secured by real property, such as mortgages, 2nd mortgages, and Home Equity Lines of Credit) and recreation loans made to consumer borrowers (not business or commercial loans).

    6. Participation. By participating, entrants agree to be bound by these Official Rules and the decisions of the Contest. Except where prohibited, acceptance of any prize constitutes winner's consent to the publication of his or her name, biographical information and likeness in any media for any commercial or promotional purpose, without limitation the Internet, or further compensation. Prizes not won and claimed by eligible winners in accordance with these Official Rules will not be awarded and will remain the property of the Credit Union.

  • How do I redeem my Merchandise Rewards?

    The easiest way to redeem your Merchandise Rewards is to log into Listerhill’s Online Banking and click the “Get Info” link to the right of your credit card information. This will take you to our credit card servicing site within the same window. Select “Rewards” on the upper right side within the screen (below FICO Score) and on the next screen, click on the CURewards logo. This will automatically sign you in to be able to redeem your Merchandise Rewards points!