Auto Loans: A First-Time Car Buyer Guide | iTHINK Financial

By: iTHINK Financial | Sep 01, 2024

Buying your first car is an experience that comes with many questions. Which car to buy, financing options, and more! Our experts at iTHINK Financial have made it easy for you by reviewing the different options, and sharing the advantages of buying your first car with a Credit Union!

For many first-time car buyers, financing is a potential option. While each first-time car buyer should first consult with a financial expert, such as a certified and licensed financial planner, before deciding on whether to finance or buy outright, those who have already determined that they would like to opt for financing through an auto loan for their first car, may wonder what their options are.


Naturally, banks are one option for securing financing. Bank loans for cars are one possible avenue for first-time car buyers, but additional options are available for securing a loan to buy a first car.

For example, credit unions are a popular alternative to banks. Credit unions share a lot in common with banks. They’re both types of financial institutions that can offer services such as accounts, loans, and other banking services. However, they differ in a few key regards, and, as such, for some first-time car buyers, credit unions may be an appealing choice.

So, what are the potential advantages of opting to go with a credit union for buying one’s first car? Let’s drive in!

What is a Credit Union?

First, it can be important to explore exactly what a credit union is. How do they differ from banks? What is the goal of a credit union, and are there advantages to using one? Let’s jump in.

A Nonprofit Organization

First and foremost, they differ from banks in one crucial regard; credit unions are inherently nonprofit  organizations. That means that their goal is not to earn profits. By contrast, banks are for-profit organizations. In other words, it is generally their goal to make profits. While that doesn’t mean that banks never make decisions in the best interest of their members, they aren’t necessarily economically motivated to.

Member Ownership

Credit unions, however, are designed to benefit their members. They’re 100% member-owned, meaning that when one opens an account and becomes a credit union member, they’re also becoming a part-owner. As such, decisions in credit unions are generally made by a board of directors who are also members.

Strong Focus on Community

Credit unions also typically take a community-oriented approach to their operations. They may offer additional services, such as education designed to help members better understand finances and their options, or create in-school credit union branches, where young people can become better equipped for their future through education and hands-on financial experiences.

With a nonprofit structure, member ownership, and a holistic focus on community, credit unions can often be an appealing choice for those looking for banking solutions. These factors are related to why first-time car buyers might opt to seek financing through a credit union rather than through another avenue, such as a traditional bank.

Advantages of a Credit Union?

We’ve explored some of the common characteristics of credit unions and how they differ from traditional banks in some ways. But what are some of the potential advantages of seeking financing through a credit union for one’s first car? Let’s explore.

Repayment Terms

For one, credit unions can offer more flexible repayment terms to their members. This isn’t necessarily the case, but some individuals may find that they can secure more flexible repayment terms through their


credit union than through a bank. There are several reasons why credit unions may offer more flexible repayment terms. These can include that with a community focus, they may be more invested in the success of their members and therefore more willing to take steps to be flexible, and that as a nonprofit organization that is member-owned, they’re able to reinvest earnings into the credit union, giving them the funding to be more flexible.

Interest Rates

Another potential benefit of seeking financing through a credit union is that they may offer borrowers more ideal interest rates, which can ultimately translate to lower costs for the borrower in the long run. There are a number of reasons why this may be true; just as is the case with flexible repayment terms, credit unions may be enabled to offer better interest rates because of their community focus or the fact that they’re a nonprofit organization that can invest earnings back into its members.

Minimum Loan Amounts

Another potential benefit of seeking financing through credit unions is that they may be able to offer lower minimum loan amounts. This can be because of their nonprofit status and community focus as well. While banks may need to worry about how profitable lending is, credit unions generally do not, and they may be able to offer loans in cases where a bank wouldn’t.

Securing Loans

Another reason why some individuals may opt to seek financing through a credit union is because they’re concerned about their creditworthiness or credit history. While credit unions, similarly to banks, are often interested in avoiding defaults on loans, they may be able to look beyond typical criteria for securing a loan and take additional factors into account. Traditional banks may be much less flexible when determining one’s creditworthiness. There are some reasons why credit unions might be more willing to offer financing to those with poor credit.

For one, as a nonprofit organization, they may be more willing to take on the risk. This can be for a few reasons; it may be because a credit union isn’t concerned with profits and is concerned with community welfare and, therefore more willing to take action to support its members. It also may be because, as a nonprofit organization, a credit union doesn’t need to worry about paying shareholders and can reinvest earnings into its members.

Another reason why credit unions might be more flexible with loans to those with poor credit is their community focus. Securing financing can be hugely beneficial to some individuals, and credit unions may be willing to take the risk of default if it means supporting their community.

Additional Considerations

No matter how one seeks to finance or purchase their first car, there are a number of considerations to take. For one, while credit unions are often an excellent opportunity for those looking for community-oriented banking solutions, it can be important to understand the requirements for membership. It can also be important to consider some of the important factors in lending, such as one’s financial position and credit history.

Moreover, while credit unions may often offer advantageous rates, terms, or lending requirements, none are guaranteed. It’s important that potential borrowers carefully consult with a financial expert and carefully review their options before making any decision.

Credit Union Membership


Credit unions can be wonderful—but it’s important to check if one can join! Membership requirements can vary between credit unions.

Credit Unions are required to establish a charter and in it, a “field of membership” This dictates who can join and which common bond that members share. For example, a credit union may require that members live in a certain area, such as a city or town. That might be the community that the organization is aimed at assisting.

Other fields of membership requirements may hinge on places of employment, places of worship, or membership of another group. As such, you may need to ensure you’re eligible to join before joining a credit union.

Lending Considerations

What’s more, though credit unions can offer flexible rates, terms, and even lending requirements, first-time car buyers looking to secure financing through one will still need to consider many of the same factors as they would seeking financing through a traditional bank.

Among these, importantly, are one’s credit score and history, one’s debt-to-income ratio—which quantifies how much one is earning in relation to how much they owe in debts—the down payment amount, the rates and term or a potential loan, and one’s general budget and income.

These considerations aren’t just crucial for securing a loan; it’s also important to ensure that one is going to be able to take on the potential financial burden of borrowing before they do.

The Next Step

Each borrower’s journey is different. Not all first-time car buyers may even want to finance their first automobile purchase. However, credit unions may offer a viable lending solution for those who have already discussed the matter with a financial expert, such as a licensed financial planner. Learn more about iTHINK Financial’s Vehicle Loan options and apply today!

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