When it comes to financing a new or used car, the decision of who to borrow from can impact much more than your monthly payment — it can affect the total cost of ownership, how quickly you build equity, and your overall car-buying experience.

As such, it should come as no surprise that one of the most common questions car buyers ask is, “Should I get an auto loan from a bank or credit union?”

Bank vs. credit union: What’s the difference?

Both banks and credit unions offer auto financing, but they operate differently and often serve different types of borrowers.

Banks are for-profit institutions that serve a broad customer base. Most national and regional banks offer auto financing and typically have online applications, established lending departments, and a range of financing products. If you already have a checking account or mortgage with a bank, you may qualify for rate discounts or loyalty perks.

Credit unions, on the other hand, are not-for-profit member-owned cooperatives. Their focus is on serving members rather than maximizing profit, which often translates into better finance terms and more personalized service. However, you’ll typically need to join the credit union before applying for auto financing, and location, employer, or affiliations may limit membership.

Comparing the two

Borrowing from a bank

Borrowing from a credit union

Choosing what’s right for you

Before deciding where to set up your auto financing, ask yourself:

• How is my credit? If you have strong credit, you may qualify for low rates from a bank or credit union. If your credit is less than perfect, a credit union is more likely to extend financing.

• Do I need fast financing? Bank financing can be processed quickly, whereas credit union membership may require more time up front.

• Am I looking for the lowest overall cost? Credit unions typically offer lower interest rates and fewer fees, making them an excellent choice for budget-conscious consumers.

• How important is customer service? If personalized support is a priority, local credit unions offer more flexibility than large institutions or third-party lenders.

• Have you been denied by banks and credit unions? Your best option is to secure financing through a dealer (new, used, or Buy Here, Pay Here) or an indirect auto finance company.

Need an option that’s not a bank or a credit union?

Do you already know that your credit score will make borrowing through a traditional financial institution difficult? Credit Acceptance is the alternative financing source that works with over 15,000 dealerships across the country. Unlike banks and credit unions, we cater to credit-challenged buyers. Get pre-qualified for auto financing via our website today, and we’ll send you the dealers nearest you.