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Financing Your VehicleUnderstanding FinancingIf you're like most people, you will finance your car purchase; that is, you will borrow the money to make the purchase. You should get your loan "pre-approved" at your credit union before you visit dealerships. Why? Dealers can use financing to make a lot of money at your expense, while AA Credit Union is interested in saving you money. Dealer FinancingWhen dealers arrange your financing, they review your credit history and then "shop" you around to several lenders. Your credit score determines the interest rate that you'll pay. More importantly, dealerships can "add points" to the interest rate that you are charged in exchange for arranging your financing. In other words, you might qualify for a lender's 7.9% interest rate but end up paying an interest rate of 9.9%. The difference between what you pay and for what you qualify is profit for dealers - their "cut" of finance charges. The dealer pockets most of the difference and the finance company keeps the rest. As many as one out of four consumers financing through dealerships is affected, with a hidden markup adding $1,000, on average to a car purchase amount. In the worst cases, loan markups add as much as $5,000 over the life of the loan. According to a Consumer Federation of America report, this practice costs U.S. consumers up to a billion dollars annually. Credit Union FinancingWhen you arrange your financing with AA Credit Union, you will usually get a lower rate than what most other lenders offer. In addition, the interest rate you pay is determined by the amount you borrow, the amount of down payment you make, and the term of your loan. The finance charge you pay is returned to you and your fellow members in the form of dividends once operation expenses have been met. One of the principal goals of AA Credit Union is to provide members with loans at very competitive rates in a convenient and friendly environment. Granting properly underwritten loans is a fundamental reason for our existence. We use members' share accounts to fund our loans, and those loans provide the income to pay dividends to members and to cover operational expenses. Read an explanation of AA Credit Union's Loan Qualification Guidelines to help you understand how your application will be evaluated. Beware of 0% FinancingSome dealerships advertise 0% financing, but only a very small percentage of buyers qualify. Once buyers get in the finance office, they may end up paying a higher rate. Carefully review dealers' loan papers; don't assume you're getting the 0% rate. Your rate may be higher and may include a hidden markup. Even if you qualify, 0% financing may not be your best option. Low financing rates often are for shorter terms and on slow-selling models. With 0% loans, dealers usually don't pay rebates on the car's sale price. Contact AA Credit union for advice about whether it makes more sense to finance with the credit union and get the rebate, or to accept the dealer's 0% offer. Your best bet often is to combine a cash rebate- reducing the amount you need to borrow - with your credit union's competitive interest rate. |
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| P.O. Box 619001 MD
2100, HDQ DFW Airport, TX 75261-9001 (800)
533-0035  |
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