Learning the basics about auto loans and financing empowers you to navigate the car-buying journey and make informed decisions with confidence. With rising car prices, financing has become increasingly common. Auto financing allows you to spread the cost of your new car over time through a loan from a financial institution like Heritage Family Credit Union. This guide will explain how auto financing works, key terms to know, and why HFCU is the smart choice for your loan needs.

Your Guide to New Car Financing

Auto loans are similar to personal, business, and other loan types; you borrow a specific amount from a financial institution and repay it with interest and fees over a set term. These repayments are generally made in monthly installments to keep your loan in good standing. When purchasing a car, you'll typically make a down payment, which is a portion of the vehicle’s total price paid upfront. The remaining balance can then be financed through a loan from HFCU or another lender. The loan proceeds are then used to pay for the vehicle.

Planning Your Purchase: 4 Steps to Car Buying

Purchasing a car is an investment, and careful planning can ensure a smooth and successful experience. Here at Heritage Family Credit Union, we want to assist you throughout the car-buying journey. Follow these steps to navigate the process with confidence:

STEP 1 | Know Your Budget 

Before you start browsing the lots, understand your budget. Carefully review your monthly expenses to determine a comfortable payment amount. Factor in not just the vehicle payment, but also estimated costs for taxes, registration fees, insurance, and any potential warranty coverage. Creating a realistic budget will guide your car selection and financing decisions.

STEP 2 | Check Your Credit Health

Obtaining a free copy of your credit report a few months before car shopping allows you to identify and address any errors. If necessary, you can take steps to improve your credit score in advance. While a strong credit score typically means lower interest rates, it's important to remember that HFCU offers options for a variety of credit situations. We consider various factors beyond just your credit score, such as your debt-to-income ratio, employment history, and the size of your down payment.

STEP 3 | Get Pre-Approved

Pre-approval for a loan from HFCU or another lender empowers you during your search. Knowing your borrowing limit upfront streamlines the negotiation process and strengthens your position as a buyer. With pre-approval, you can confidently focus on finding the right car within your budget.

STEP 4 | Find Your Perfect Match

Once you have a handle on your budget and vehicle financing options, it's time for the fun part: car shopping! With a clear understanding of your needs and financial constraints, you can search for a vehicle that aligns with your lifestyle and budget.

Understanding Your Auto Loan: Essential Considerations

We've established the importance of budgeting and securing pre-approval for financing before you start shopping for a vehicle. Now, let's delve deeper into understanding the key features of your auto loan:

Down Payment. While not always mandatory, a down payment can influence your loan terms. A larger down payment reduces the amount you need to borrow, which reduces monthly payments and often leads to a more favorable interest rate. When buying a new car, a down payment of at least 20% is highly recommended. This helps you avoid owing more than your car is actually worth. New cars depreciate quickly, so with a smaller down payment, you risk still owing money on the loan if you sell it, trade it in, or it gets totaled in an accident.

Annual Percentage Rate (APR). The APR reflects the total cost of borrowing for your car, including interest and any associated fees. Your credit score, loan term, and down payment all influence the APR you qualify for.

Monthly Payments. Your monthly payment covers both the principal amount borrowed and the interest accrued. Ideally, your monthly payment should be manageable and not exceed 10% of your take-home pay.

Loan Term. The loan term refers to the length of time you have to repay your debt. Shorter terms typically translate to higher monthly payments but lower overall interest costs. Conversely, longer terms mean lower monthly payments but potentially more interest paid over the life of the loan.

By understanding these key concepts, you can make informed decisions when finalizing your loan and ensure a smooth ownership experience. Remember, HFCU is here to guide you through every step of the buying journey.

Why Choose HFCU for Your Auto Financing Needs?

At Heritage Family Credit Union (HFCU), we understand that purchasing a vehicle is a major investment. That's why we offer a variety of services and benefits designed to make your experience smooth and rewarding:

  • Competitive Rates and Flexible Terms. We offer competitive rates with flexible terms to suit your budget and repayment preferences. Our auto loan terms range from 24 to 84 months, allowing you to find a monthly payment that aligns with your financial goals.
  • Pre-Approval Advantage. HFCU offers a quick and convenient pre-approval process, so you can shop with confidence and focus on finding the perfect car.
  • Streamlined Online Tools. Utilize our user-friendly online auto loan calculator to estimate your monthly payments before you visit the dealership.
  • Financing Options for Every Need. Whether you're purchasing a new or used car, or refinancing an existing vehicle, we have solutions to fit your situation.

Peace of Mind with Loan Protection Products

HFCU offers a variety of optional protection products to provide peace of mind for your auto loan:

  • Freedom to Pay Early. At HFCU, there's no penalty for paying off your auto loan early. This allows you to save on interest charges and achieve your financial goals faster.
  • Guaranteed Asset Protection (GAP). This valuable product helps bridge the gap between your insurance coverage and the remaining balance in case of a total loss.
  • Mechanical Repair Coverage (MRC). Protect yourself from unexpected repair costs with coverage that can help with towing, rentals, and repairs.
  • MEMBER'S CHOICE™ Borrower's Security. This comprehensive protection plan safeguards your payments in case of disability, involuntary unemployment, or unexpected circumstances.

We believe in offering exceptional value to our members. By choosing HFCU for your auto loan, you'll benefit from competitive rates, flexible terms, convenient online tools, and comprehensive protection options. Contact us today and let our experienced lending team guide you through the car-buying process and help you secure the vehicle financing solution that works for you.