Dealer Financing vs. Credit Union Financing Calculator
Dealer financing is convenient, but a credit union pre-approval often beats it. Compare the two rates on the same loan to see the difference.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Amount financed
- $30,000
- Loan term (years)
- 5
- Dealer interest rate
- 8.50%
- Credit union rate
- 6.50%
$28.51 less per month
- Dealer payment$615.50
- Credit union payment$586.98
- Dealer total interest$6,930
How the saved with the credit union changes with amount financed
Holding the other inputs at the example above, here is how the result moves as amount financed changes.
| Amount financed | Saved with the credit union | Dealer payment |
|---|---|---|
| $15,000 | $855 | $307.75 |
| $25,000 | $1,426 | $512.91 |
| $30,000 | $1,711 | $615.50 |
| $45,000 | $2,566 | $923.24 |
| $60,000 | $3,421 | $1,230.99 |
The math behind it
The calculator amortizes the same amount financed over the same term twice — once at the dealer's rate and once at the credit union's rate. It then reports the difference in total interest and in the monthly payment. Because everything except the rate is held equal, the result isolates the pure cost of the rate spread between the two lenders.
Assumptions & limits
- The amount financed and the term are identical on both sides, so only the interest rate differs.
- Both rates are fixed for the full term.
- It assumes the dealer rate is the buy rate you are actually offered, which may include a dealer markup over the lender's rate.
- Taxes, fees, and any add-on products are excluded — compare them separately, since dealers sometimes bundle them.
- The comparison does not account for manufacturer promotional rates, which are a different trade-off.
Common questions
Why is credit union financing often cheaper than the dealer's?
Credit unions are member-owned and typically price auto loans lower than dealer-arranged financing, which can carry a markup the dealer adds on top of the lender's rate. On the same loan, even a one- or two-point difference compounds into real money over the term, as the calculator shows. That said, dealers occasionally beat credit unions with manufacturer-subsidized promotional rates.
Should I get pre-approved before going to the dealership?
Yes. A credit-union pre-approval gives you a rate to beat and turns dealer financing into just another quote. Bring the pre-approval, let the dealer try to beat it, and take whichever is genuinely lower. Pre-approval also caps how much dealer add-ons can inflate your loan.
Is the lowest rate always the best choice?
Usually, when the loan amount and term match. But watch for differences the rate alone hides — a longer dealer term with a lower payment can cost more total interest, and bundled products or fees can erase a rate advantage. Keep the term equal, as this calculator does, for a fair comparison.