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Auto Loans

Credit Union Auto Loans: What Should You Know

Updated Jan 21, 2023   |   8-min read

There has been a steady growth in the number and size of credit unions over the last decade as consumers have begun to prefer a more personalized banking experience.

Credit unions can make that possible because they are owned by their members – the people who bank with them. Any profits generated by a credit union are generally shared with the members as dividends or invested back into the business to lower borrowing rates and increase savings rates.

Growing Market Share

With over 5,000 credit unions, the credit union industry is still dwarfed by the massive footprint of banks. However, considering there are 120 million households in the U.S., its presence is certainly being felt in the market. Most credit unions cater to specific memberships, such as military members, employees of city and state governments, law enforcement personnel, or association memberships. Generally, you have to be affiliated with these organizations in order to become a member of a credit union.

An increasing number of credit unions have begun organizing around communities, allowing anyone living in a certain geographic area to join. Once you become a member, you have access to a wide range of banking and loan products, including checking and savings accounts, mortgage loans, personal loans, and auto loans.

Auto Lending Accelerating

One of the fastest growing product segments in the credit union industry are auto loans. Credit unions now hold a 28% share of the U.S. auto loan market. In 2016, new car loans from credit unions reached $126.7 billion, a 20% increase from the prior year, while used car loans hit $195.1 billion, a 13.5% increase. One of the reasons for the increase in credit union car loans is that banks are issuing fewer of them. The other reason could be that consumers might find it easier working with a credit union than with a bank when trying to obtain any type of financing.

Advantages of Credit Unions for Auto Loans

One of the primary advantages of working with a credit union is that it doesn’t have to answer to a corporation or shareholders when making loan decisions. Financial transactions are typically negotiated on a local level, giving credit unions more leeway in working with customers on an individual basis. When a credit union customer sits down with a decision-maker, that person is likely to be another member of the credit union who might be more open to understanding the customer’s particular circumstances.

As a not-for-profit business, credit unions are low-key in terms of their physical location and their advertising, which keeps their overhead costs low. For that reason, credit unions are able to offer their members more attractive auto loan rates. Being completely customer-centric, they also offer more flexible terms and valuable ancillary services, such as car buying services which can save customers money on their car purchases.

The application process for an auto loan with a credit union is not much different than applying with a bank. The application requires standard information – income, employment history, Social Security number, credit information, and information on the type of vehicle you want to purchase. Most credit unions offer loans for new and used cars, and many will finance third-party purchases. Once you are approved you can go car shopping with a pre-approval letter.

Although many of the larger credit unions have increased their online capabilities, some credit unions may still require an in-branch visit to apply for an auto loan. But then, many traditional banks also require an in-branch visit to sign the paperwork once the loan is approved online.

>> Read More: Best auto loans

Comparing the Largest Credit Unions

With thousands of credit unions to choose from, it can be difficult to find which offer the best auto loan rates. A good place to start is by comparing the three biggest credit unions. And it just so happens that the three biggest credit unions are also among the best in terms of loan rates.

Navy Federal Credit Union

With more than $55 billion in assets and nearly 5 million members, Navy Federal Credit Union is far and away the largest credit union in the U.S. Membership is open to any active or retired member of the military and employees of the Department of Defense. Immediate family members are also able to join.

New vehicle financing is available for any car produced over the last three years (including the current year) with less than 7,499 miles. The lowest current rate of 1.99 percent is available for terms up to 36 months. For the longest terms of 85-96 months, the lowest rate currently offered is 4.49 percent. The lowest rates are also available for late model used vehicle financing. A late model used vehicle is described as one produced in the three years prior to the current year with 7,500 to 30,000 miles. Used vehicle rates currently start at 3.59 percent. A used vehicle is one that has over 30,001 miles regardless of the model year.


  • NFCU offers guaranteed asset protection as an option for a one-time cost of $199, which can be rolled into the loan.
  • ​The NFCU website offers some great online tools and resources, including an auto loan calculator for estimating your monthly payments based on an assumed rate and term.
  • Active duty, retired military members who have been customers for 25 years are eligible for a quarter point discount off the APR if they apply in-branch or on the phone.


  • NFCU is very strict with its membership requirements. If you don’t have a family member who has served in the military, then you are probably out of luck.
  • NFCU can also be strict with its credit requirements, making it difficult for anyone without exceptional credit to qualify for its lowest rates.

State Employees Credit Union

Raleigh-based State Employees’ Credit Union (SECU) comes in a distant second with $28 billion in assets, serving 1.9 million members. Membership is open to North Carolina state employees and federal employees involved with state functions, including the North Carolina National Guard.

SECU offers very competitive auto loans for new and used vehicles. New vehicles are eligible for up to 125% financing, including 100% of the MSRP and 25% for other vehicle purchase costs, such as taxes, registration, and extended warranties.

A vehicle is considered new for financing purposes when it is a current, prior year, or upcoming year model with 10,000 miles or less. Rates currently start as low as 1.75% for terms up to 36 months and when payments are made through payroll deduction or funds transfer pay. Terms are available for up to 96 months.

Used vehicle financing is available for up to 125% of the value of the vehicle based on the National Association of Auto Dealers. SECU currently offers a 4.75% APR (with payroll deduction or funds transfer pay) on all terms up to 72 months.


  • Very competitive APR on new cars up to a 36 month term.
  • ​Robust online capabilities, including quick online application, quick approval, and helpful tools and resources.
  • 125% vehicle financing on both new and used cars.


  • Limited membership.
  • ​Loans are only available in North Carolina, South Carolina, Georgia, Tennessee, and Virginia.
  • Only one, not very competitive loan rate offered for used car financing.

PenFed Federal Credit Union

PenFed Federal Credit Union is the third largest credit union with nearly $18 billion in assets and 1.3 million members. Membership eligibility extends to any member of the military, any employee of the U.S. government and immediate family members. You can also join PenFed if you belong to a qualifying organization like the National Military Family Organization or Voices for America’s Troops.

PenFed finances new vehicles for up to 84 months, with the lowest current APR of 1.49% reserved for terms up to 36 months. PenFed will finance new vehicles up to $100,000 up to 110% of their MSRP. New vehicles are described as current and previous model years and you must be the vehicle’s initial owner.

Used cars are eligible for 110% financing based on NADA values. APRs currently start at 2.49% for terms up to 36 months. A vehicle is considered used if it is the current or any prior years. The 72 month term option is only available for the current and prior two model years.

PenFed Pros

  • Extremely competitive new and used car rates.
  • ​110% financing available on new and used cars.
  • Instant online loan approval.

PenFed Cons

  • PenFed financing requires a very good credit score; otherwise, loan applications are outsourced to a third-party lender.