Key Takeaways
- Prioritize APR over Interest Rate: Always compare the Annual Percentage Rate (APR) rather than just the interest rate, as the APR includes lender fees and represents the true cost of the loan.
- The Power of Pre-Approval: Securing a pre-approval from a member-owned institution like OneAZ gives you a clear budget and turns you into a "cash buyer," allowing you to negotiate the car price without focusing on dealer financing.
- Balance Term Length Carefully: While longer loan terms (60+ months) offer lower monthly payments, they result in paying significantly more interest over time and increase the risk of negative equity.
- Credit Score is King: Your credit score is the primary factor determining your APR; even a small improvement in your score before applying can save you thousands of dollars over the life of the loan.
- Understand the Credit Union Advantage: Because credit unions are not-for-profit, they often provide lower average APRs, fewer fees, and more personalized service compared to traditional banks or dealership financing.
- Arizona Market Awareness: With high average vehicle prices in Arizona, focusing on a larger down payment and a lower APR is essential to managing the costs of popular (but expensive) trucks and SUVs.
- Refinance for Better Terms: If market rates drop or your credit score improves after your purchase, refinancing your loan can be a strategic move to lower your monthly payments or reduce your total interest."
Start with OneAZ Credit Union
OneAZ Credit Union exists to serve its members. As a member-owned, not-for-profit financial institution, we focus on providing value to you. This difference in structure often translates into competitive loan rates and personalized service for auto financing. Starting your search here means working with an institution dedicated to your financial well-being, not generating profits for outside shareholders.
What Is an Auto Loan?
An auto loan is a secured loan used to buy a car, truck, or SUV. The vehicle itself serves as collateral. The loan principal is the amount of money you borrow. You repay this principal plus interest over a fixed period, known as the loan term. This repayment happens through fixed, scheduled monthly payments.
Rates, Terms & Monthly Payments
Three major components shape the total cost of your auto loan and the amount you pay each month.
APR vs Interest Rate
The interest rate is the cost of borrowing the principal amount, expressed as a percentage. The Annual Percentage Rate (APR) is the true cost of the loan. The APR includes the interest rate and certain fees from the lender. When comparing loan offers, the APR gives you the clearest picture of the total borrowing expense.
Term Length Tradeoffs
The loan term is the length of time you have to repay the loan, usually measured in months. Common terms are 36, 48, 60, or 72 months.
- Shorter Term: A shorter term means higher monthly payments but lower total interest paid over the life of the loan.
- Longer Term: A longer term means lower monthly payments but results in paying more total interest. A longer term also means your vehicle may depreciate faster than you pay off the loan balance, creating negative equity.
Credit Score Impact on APR
Your credit score is the most significant factor affecting your APR. Lenders use this score to assess the risk of you defaulting on the loan
- .Higher Credit Score: Signals lower risk, allowing you to qualify for the lowest available rates.
- Lower Credit Score: Signals higher risk, which results in a higher APR and a greater cost for the same loan amount.
What Affects Rates in Arizona?
Auto loan rates change based on many factors. Current market conditions, including rates set by the Federal Reserve, impact all lending in Arizona. Your individual rate will depend on:
- Credit Score: The most important factor.
- Loan Term: Shorter terms generally receive lower rates.
- Vehicle Type: New cars typically get lower rates than used cars.
- Down Payment: A larger down payment reduces the loan amount and the loan-to-value ratio, which lowers the lender's risk. This can help secure a better rate.
The average price of a new vehicle in Arizona is near $40,000. Used vehicles average in the mid-$20,000 range. These high prices mean most Arizona drivers must finance their purchase. The kind of vehicle you choose also matters here. Trucks and SUVs make up a large portion of vehicle sales across the state, and these vehicle types often carry higher price tags and higher loan amounts. This makes seeking a low APR and an affordable payment even more important for members in the Phoenix, Tucson, and northern Arizona markets. Shopping for the best possible rate before you agree to a price is the simplest way to lower your overall cost.
Why Get Pre-Approved with OneAZ?
Getting pre-approved for an auto loan is a powerful step before visiting a dealership. Pre-approval means OneAZ has already reviewed your finances and agreed to lend you a specific amount at a specific rate, pending the vehicle's final details.
This provides several major advantages:
- Know Your Budget: You know your maximum spending limit and your exact monthly payment ahead of time.
- Negotiating Power: You become a cash buyer in the dealer's eyes. You can focus your negotiations solely on the vehicle's price, not on the financing.
- Save Time: You streamline the process at the dealership, as your financing is ready to go.
- Shop Confidently: You have a solid comparison rate to measure against any offers the dealership might present.
Finance Your Drive
Check out our auto loan solutions and take the next step toward your new car today.
Credit Union vs Dealer/Bank Financing
When securing a loan, you have choices: a credit union, a bank, or the dealership's financing department.
Table
Credit unions, like OneAZ, are member-owned. This structure allows us to offer more favorable terms to our members. Dealers often work with various banks and lenders but may increase the rate to earn a profit on the financing itself. Arizona residents secured a loan in 85% of purchases in 2024. This shows how crucial financing is to buying a car here. Choosing a local partner like OneAZ can simplify the transaction and help keep more money in your pocket.
Money-Saving Tips for Your Auto Loan
Once you understand the basics, follow these steps to save money on your vehicle purchase:
- Check Your Credit: Review your credit report for errors and work to improve your score before you apply.
- Shop Around: Compare pre-approval offers from multiple financial institutions, including OneAZ.
- Make a Down Payment: Paying more upfront reduces the principal, lowers your monthly payment, and decreases the total interest paid.
- Keep the Term Short: Choose the shortest term you can comfortably afford to minimize interest cost.
- Focus on Total Cost: Negotiate the vehicle price first, separate from the financing terms.
Related Content
Rev Up Your Car BudgetWhen to Refinance Your Auto Loan
Refinancing means replacing your current auto loan with a new one, often with a different lender. You should consider refinancing if:
- Your Credit Improved: A higher score since your original loan may qualify you for a much lower APR.
- Market Rates Dropped: If overall interest rates are lower now than when you first financed, you could save.
- You Want a Shorter Term: You can refinance to a shorter term to save on total interest, provided the monthly payment still fits your budget.
- You Want a Lower Payment: A longer term can lower your monthly payment, but remember this increases total interest paid.
Finding the right auto loan is a key part of your vehicle purchase. Knowing your options, understanding the rates, and getting pre-approved puts you in the driver's seat.
Get pre-approved for your auto loan with OneAZ Credit Union today. Visit our website or stop by a local branch to start your application.
