applying for auto financing at CU AND dealership

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
BarbBrooklyn
Posts: 944
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

applying for auto financing at CU AND dealership

Post by BarbBrooklyn »

We are contemplating buying a new car. We have cash, but using it for this purchase would deplete our retirement Emergency Fund; I would need to rebuild it by selling (and paying taxes) from tIRA or taking funds from taxable.

If I apply to my credit union for an auto loan (currently quoting around 2% for new cars) can I also get approved for dealer financing if there is incentive financing? Subaru seems to be offering 0.90 on the model we want.

Credit score is low 800s; no debt except mortgage and a recent 4K couch financed at 0% for 24 months. Pension, SS and dividends cover all of our expenses.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
Jack FFR1846
Posts: 13278
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: applying for auto financing at CU AND dealership

Post by Jack FFR1846 »

Since my son just bought a new Subaru STi this past Saturday, I'll tell you that you're not going to beat the 0.9% at any credit union. He qualified with no issue with a high 700's credit score. Why would you even consider applying at the CU? 0.9% is up to 4 years. We know that DCU wasn't close with rates. They're right on their site.
Bogle: Smart Beta is stupid
Topic Author
BarbBrooklyn
Posts: 944
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: applying for auto financing at CU AND dealership

Post by BarbBrooklyn »

Thanks, Jack. We are currently trawling online for price and notice that SOME dealerships have promotional financing on Foresters...and some don't. I don't want to commit to a dealership on price and then get taken for the "finance guy" ride after the fact.

Trying to keep all the balls in the air--price, finance and possible trade-in is sometimes dizzying!
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
n0v0w3ls
Posts: 7
Joined: Thu Oct 15, 2020 9:58 am

Re: applying for auto financing at CU AND dealership

Post by n0v0w3ls »

There isn't anything stopping you from applying under both, you aren't obligated to take the financing. If you are able to get 0.9% through a manufacturer you definitely won't beat it by going through your own credit union.

If you don't pick a model with a special incentive rate, tell the finance office in the dealership that you have financing available from your credit union at 2.0%. When you tell them that up front they may be able to push the banks they send the application to for a lower rate. Keep in mind that they can make money on a rate spread (finance contracts you at 4.0% and bank buys the loan at 2.0%). If you go in with a low rate you can get externally they are much more likely to sell you the loan at the same rate the bank is buying it at. In those situations they typically get a flat fee from the bank of $100 - $200. On the other hand if you go to your CU they get nothing, so knowing what rates you can get on your own can ensure you get the best possible rate.

The only down side to this is you will generate more credit pulls which will reduce your credit score slightly. If you are in the 800 range the hit should be minimal and if doesn't seem like you are likely to apply for more credit anytime soon anyhow.
DocInColo
Posts: 90
Joined: Tue Aug 11, 2020 9:20 pm

Re: applying for auto financing at CU AND dealership

Post by DocInColo »

I always found that dealer financing usually has better rates than banks and CUs unless you have less than stellar credit. They make the money from selling you the car, whereas the bank/CU makes money from the loan interest. I highly doubt you will find an interest rate lower than 0.9%. I would go direct to Subaru, don't even hassle with the CU, put as much of a downpayment as you can comfortably afford, and then go from there. You won't tie up too much cash or have to sell investments, and the interest you'd be paying is negligible.

The other option is to try a car buying service. I think AAA has one? You tell them exactly what you want (down to the color and trim) or if you want to test multiple cars, and they shop around to various dealers to find what you want at the best price. Its a HUGE time saver. No need to drive to multiple dealers to try different makes and models.
Topic Author
BarbBrooklyn
Posts: 944
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: applying for auto financing at CU AND dealership

Post by BarbBrooklyn »

Thanks, all!

We went to the Costco approved dealer and got "the Costco price"-- this is the way I've bought my last two cars, in 2000 and 2012.

I am currently emailing multiple dealers to see if we can find a better deal.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
Jack FFR1846
Posts: 13278
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: applying for auto financing at CU AND dealership

Post by Jack FFR1846 »

Current Subaru incentives are from SOA (Subaru of America) serviced by Chase. All dealers will offer this financing as it's way better than anything you'll find anywhere. My son bought an STi, which typically is the last model to receive any incentives. Up to 4 years (with a good enough credit score), it's at 0.99%. Other models are 0%. You certainly won't find better than 0%. There isn't any cash incentive in lieu of financing, so it's worthwhile to take the financing offer, unless you want to pay cash.
Bogle: Smart Beta is stupid
Post Reply