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Buyer Beware: Dealerships vs. Credit Union Financing

When shopping for a new or used vehicle, you can save time and money by getting pre-approved through Best Reward before you start shopping. If you aren’t yet familiar with why it pays to get pre-approved with your local TRUSTED LENDER before you start shopping, click below to see our top reasons why getting pre-approved is a better option.

But in today’s market, where vehicles are in demand, inventory is low, and margins are tight, auto dealers are increasingly incentivized to get customers to finance through their preferred lenders. In some cases, a dealer may even seem reluctant to accept a pre-approval letter if it didn’t originate from their preferred lenders.

Why? Dealers Want To Make a Profit on Financing

If you are headed to an auto dealership to shop and the salesperson seems reluctant to accept your credit union pre-approval, or says they do not accept credit union financing, understanding the reason why can help you meet these objections head on, and lets them know you are a serious, informed buyer.

Auto dealers earn additional profits when they finance your loan through certain lenders that they work with, and may even receive incentives to send the loans through their financing partners.

When you are approved through dealer financing, the dealership makes money. In many cases the rate you are approved for gets bumped up by the dealer before it gets to you in the finance office. For example if the dealer’s lending partner approves you for an auto loan at 2.99%, the dealer may present you with a rate of 3.99%. Still a low rate, but if you accept the rate, the dealer pockets the extra profit from that 1%. The extra profit is good for the dealers, but not so good for you.

What If A Dealer Offers 0% Financing vs. A Low Rate From Best Reward?

Dealers often advertise 0% financing for well qualified borrowers. Most credit unions offer low rates, but rarely 0%.

If you are shopping with a credit-union pre-approval and a dealer encourages you to submit an application for their 0% financing, it is worth your while to ask questions and understand the offer. But keep in mind that not everyone will qualify for 0% and the only way for the dealer to determine your actual rate is by pulling your credit.

Again, dealers and their lenders aren’t in the business of giving away money, and they need to make a profit on the loan somehow. With 0% offers there are frequently fees and hidden charges that get rolled into the loan. In some cases, financing at 0% with fees rolled into your loan can actually result in a higher monthly payment than if you finance at a low interest rate without fees rolled in. Click to see an example and how to compare 0% financing offers.

Why Credit Union Pre-Approvals Work For You

The unique structure of credit unions, like Best Reward, allows them to offer their members many financial benefits including:

Competitive Rates – No need to wait for “dealer specials” as credit unions offer great rates and benefits year-round.

Affordable Payments – With a variety of loan terms, credit unions work with you to fit your payment within your budget.

Easy Pre-Approvals – Most credit unions offer easy online applications and fast pre-approvals so you don’t walk into the dealership unprepared.

Save on Fees – At Best Reward Enjoy No Application Fees, Processing Fees, or Pre-Payment Penalties

Available Extras – Best Reward offers the same dealer extras like Payment Protection, GAP, and Auto Insurance to protect your vehicle at an affordable cost, but won’t pressure you into making those decisions at signing. If you want to add extras later we can work with you, or help you evaluate what makes the most sense for your specific vehicle or financial situation.

Sign Documents Wherever You Are – e-Sign powered by DocuSign® is the tool that Best Reward uses which allows us to make your loan documents accessible electronically for you to sign from anywhere, anytime 24/7.

Financed Elsewhere – Refinance with us and we may be able to lower your rate or monthly payment.

What If the Auto Dealer Won’t Accept My Credit Union Pre-Approval?

It’s almost always in your best interest to get your pre-approval with Best Reward first and tell the dealer that your choice of financing is non-negotiable. If they refuse to work with you; let them know you will take your business elsewhere.

With a pre-approval you have the flexibility to keep looking until you find the right car, deal, or dealership you are comfortable with. With Best Reward, you can feel confident in your financing because you are working with someone you can TRUST; our Loan Officers are here to help.

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