Average car payment are now $770/month — could a credit union’s lower rate save you, or will longer loans cost you more?

Being in the market for a new car is hard enough with tariffs pushing sticker prices up higher. And with the average new-car payment reaching $770 a month (and ~$531 per month for used cars), according to Experian (1), more buyers are looking to take out auto loans to finance their next car, so picking the right one is crucial.

While credit unions can offer lower rates than a bank, it’s important to be aware of the tradeoffs before you sign your name on the dotted line.

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Benefits and drawbacks to credit unions

What differentiates credit unions from major banks is their business model. Banks are in business to generate profits, while credit unions adopt (2) a not-for-profit model. Membership in a credit union tends to be more selective with criteria based on ties to a certain company, field of employment, or a person’s residence.

Otherwise, credit unions offer many of the same commercial products that a bank does: credit cards, home loans, checking and savings accounts, personal loans and of course, auto loans.

A major benefit of credit unions is their ability to offer lower interest rates since profits aren’t a priority for them. They serve their members instead of stockholders. While credit unions tend to have fewer branches, some have joined shared branching networks to give members access to in-person locations nationwide.

The average repayment span of a car loan stands at 69 months, or just under six years, according to Experian. Some credit unions, though, offer much longer payment periods. Navy Federal Credit Union — which serves active-duty servicemembers, their families as well as Department of Defense civilian employees — offers up (3) to a 96-month auto loan. The interest rate, though, is almost double that of a 12-36 month loan, which increases the total amount paid over the long run.

Credit unions have a limited amount of capital available given their smaller size. So their ability to underwrite loans isn’t normally as ample.

Read More: Are you paying too much for car insurance? Here are 3 clever ways to slash your monthly bill

Picking the right credit union

Choosing a credit union that best fits your financial needs will first depend on the cost of the car being purchased. Longer loans of 84 months or more are now more common (4) given the average price of a new car (5) is $49,220, just under a record set late last year. A longer term can shrink monthly payments, but it will cost more over the long run as interest piles up coupled with the steadily depreciating value of a car.

A used car could make more financial sense for a borrower who doesn’t want to be on the hook for lengthy, substantial monthly payments.

Credit union members will usually have access to either a direct loan from the institution or in some cases through a credit union partner at a dealership. Some credit unions will allow (6) customers the option to defer a payment in the first 90 days if that suits a customer’s needs.

Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

NerdWallet (1); National Credit Union Administration (2); Navy Federal Credit Union (3); The Washington Post (4); Kelley Blue Book (5); CNBC (6)

This article originally appeared on Moneywise.com under the title: Average car payment are now $770/month — could a credit union’s lower rate save you, or will longer loans cost you more?

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.