Car Payments Are Getting More Expensive: What You Need to Know

Buying a car has become increasingly difficult for many Americans. According to Experian, the average monthly payment for a new car is now $770.

For used cars, the average payment is around $531 per month. With car prices rising due to tariffs, more people are turning to auto loans to afford their next vehicle.

What Are Credit Unions?

Credit unions are financial institutions that work differently from traditional banks. Here's the key difference:

• Banks focus on making profits for their shareholders
• Credit unions are not-for-profit organizations that serve their members

To join a credit union, you typically need to meet certain requirements. These may include working for a specific company, being in a certain profession, or living in a particular area.

Credit unions offer many of the same services as banks, including:

• Credit cards
• Home loans
• Checking and savings accounts
• Personal loans
• Auto loans

Pros and Cons of Using a Credit Union for Car Loans

Advantages

1. Lower interest rates — Since credit unions aren't focused on profits, they can often offer better rates than banks
2. Member-focused service — They prioritize helping their members rather than pleasing stockholders
3. Flexible options — Some credit unions let you skip your first payment for up to 90 days

Disadvantages

1. Fewer branch locations — Though some credit unions have joined networks to provide more in-person options nationwide
2. Limited funds — Because they're smaller, credit unions may not be able to approve as many loans

Understanding Loan Terms

The average car loan now lasts about 69 months (nearly six years). Some credit unions, like Navy Federal Credit Union, offer loans as long as 96 months (eight years).

However, longer loans come with a catch. While they lower your monthly payment, you end up paying much more in interest over time. For example, Navy Federal's 96-month loan has an interest rate nearly double that of a shorter 12-36 month loan.

Things to Consider Before Choosing a Loan

1. New car prices are high — The average new car costs about $49,220
2. Longer loans are becoming common — Loans of 84 months or more are increasingly popular because of high car prices
3. Used cars may be a smarter choice — If you want to avoid large, long-term payments, a used car could save you money
4. Watch out for depreciation — Cars lose value over time, so a long loan could leave you owing more than your car is worth

The Bottom Line

When shopping for a car loan, compare your options carefully. Credit unions may offer lower rates, but make sure you understand the total cost of longer loans before signing.

A lower monthly payment might seem appealing, but it could cost you more in the end.

Note: This article is for informational purposes only and should not be considered financial advice.

-

Get the latest on auto loan relief and other tips by subscribing to our weekly newsletter here!