Credit union car loans

Credit unions are not-for-profit financial institutions that are owned by their members. While you may need a membership, you can often find competitive rates on credit union car loans.

Credit union car loan rates

As a benchmark, the average car loan rate in Canada according to Statistics Canada is 7.79%.

	Credit union car loan rate	Loan term
	2024 vehicles Special fixed rate: 5.50% Regular fixed rate: 6.00% Special variable rate: 6.45% Regular variable rate: 6.95% (prime based) Older vehicles Special fixed rate, 2020-2023 vehicles: 6.25% Special fixed rate, 2019 and older: 7.80% 2024 recreational vehicles Special fixed rates: 6.25% - 6.74% Regular fixed rates: 5.75% - 6.24%	3-8 years (new), 3-5 years (used)
	7.99% for vehicles 5 years old or less	Up to 5 years
	New car loan Fixed rate: 6.90% - 7.50% Variable rate: 9.69% "Go Green" hybrid car loan Fixed rate: 6.40% - 7.00% Variable rate: 9.19%	1-5 years
	Personal loans start at 8.2%	Unknown

Must read: Best car loans in Canada

Should I get a car loan from a credit union?

It depends on what you’re looking for in a car loan. Credit unions provide competitive car loan interest rates in Canada depending on the car you’re looking to buy and your financial situation. For example, some credit unions have special rates for any type of new car, including electric and hybrid vehicles. However, you may need to get a membership to apply for credit union car loans.

Fixed vs. variable rate credit union car loans

You might be able to choose between a fixed or variable interest with your credit union auto loan. With a fixed rate car loan, your interest rate stays the same throughout the loan term. With a variable rate car loan, your interest rate goes up or down depending on the credit union’s prime rate. This is influenced by the Bank of Canada’s prime interest rate, which changes regularly.

If the variable rate goes up, your payments usually stay the same, but more of your money goes towards paying down interest rather than the principal amount.

The central bank raised the benchmark interest rate eight times from March 2022 to January 2023. Rates are expected to lower in 2024, although Bank of Canada representatives have not confirmed the timing, saying they are waiting for inflation indicators to ease sustainably before making a move.

Secured vs. unsecured credit union auto loans

When searching for credit union car loans, one feature to note is whether the car loan is secured or unsecured, because this can differ among credit unions. Generally, loans with collateral have lower interest rates than loans without collateral.

A secured car loan means the car you’re buying is collateral for the loan. If you fail to make repayments, the credit union can repossess your car. An unsecured car loan does not require collateral. The older the car, the less likely it will be accepted as collateral.

New vs. used credit union car loans

Credit unions offer car financing for both new and used vehicles. Some offer special discounted rates for current-year models or new electric vehicles.

Credit unions can also finance used cars, but there may be a cut-off year. Banks and credit unions typically don’t want to finance cars older than 10 years. If you’re buying a used car, expect higher rates compared to a new car loan.

Do I qualify for credit union auto loans?

To qualify for credit union car loans, you must meet two sets of criteria: membership requirements and loan eligibility requirements.

Membership requirements

Credit unions are meant to serve a specific population. There are three main types of membership requirements for credit unions:

• Geographic. Sometimes membership is only available to people who live in a certain area or province as their emphasis is on the community that they serve.
• Employment. Some credit unions are only available to employees at a certain organization, like the Police Credit Union.
• Donation. Many credit unions allow you to join even if don’t meet its typical geographic or employment requirements by making a small donation to a local charity.

Often you can meet geographic or employment requirements if a direct family member is eligible—even if you aren’t.

Loan eligibility

Every credit union has its own eligibility requirements. However, there are some criteria you generally must meet with every lender:

• Be a Canadian citizen or permanent resident
• Be at least the age of majority in your province or territory (18 or 19 years old)
• Have a steady income and be employed for 3+ months
• Have a credit score above 660

Can I get a credit union car loan with bad credit?

You won’t likely be approved for a credit union auto loan if you have poor credit. Overall, credit unions have strict eligibility requirements and require a good or excellent credit score of at least 660. If you’re looking for a car loan and your credit score is under 560 or 600, learn about your bad credit auto loan options.

What types of auto loans do credit unions offer?

Credit unions are flexible with their vehicle loans. You can find credit unions that offer the following:

Can you use a credit union auto loan for a private car sale?

Some credit unions do allow you to use their auto loans to finance a private sale. Before you apply, check first with the credit union whether it can offer this, and find out whether the private sale auto loan is secured or unsecured. Alternatively, you can apply for a personal loan to buy a car from a dealership or private seller.

How to get credit union car loans

While the application process might vary a little between credit unions, you’ll generally following these steps:

1. Compare credit unions

Shop around to find a credit union you want to join. Weigh factors like membership fees, interest rates, loan terms, loan amounts and the type of loans offered.

2. Get pre-approved

Often you can get a ballpark idea of what loan amounts, rates and terms you might be eligible for by filling out a short online form or talking to a loan officer at the credit union. Try to get car loan preapproval with a few lenders so you can pick the best offer. You can even use this offer to negotiate for a lower rate at a dealership.

If you decide to go with the dealership financing, make sure to read the contract. Dealerships sometimes sneak in unnecessary add-ons that can make the overall cost higher. They might also offer 0% financing—though these typically have strict conditions.

3. Get approved

If you want to proceed with the credit union’s offer, consent to a hard credit check and provide documents to verify your income and identity.

4. Submit your contract

Sign your car purchase and loan documents. If you’re buying from a private party, you should receive the money by cheque or by direct deposit to your account. Otherwise, your credit union might send the funds directly to the dealer.

How long does it take to get approved for a credit union auto loan?

As a general guide, getting a credit union car loan from start to finish can take a few days up to several weeks.

Credit unions have longer car loan approval times compared to online lenders and dealerships, which often offer financing on the spot. This is because credit unions require more documentation to verify your identity, income and employment status, which slows down the process. If you aren’t yet a member, becoming one adds even more time.

Some credit unions let you submit a quick online application, and a representative will reach out to you regarding next steps within one or two business days.

How much will a credit union car loan cost me?

The cost of a credit union car loan depends on your interest rate, loan term and loan amount. As an example, here’s how much a new and used credit union auto loan could cost at different fixed rates and terms. To keep things simple, we’ll exclude sales tax, trade-in value and other cost factors.

$50,000 new car loan at 6.95% APR

	5 years	7 years
Monthly payment	$989	$753
Total interest charged	$9,333	$3,287
Total loan cost	$59,333	$63,287

$25,000 used car loan at 9% APR

	5 years	7 years
Monthly payment	$519	$402
Total interest charged	$6,138	$8,787
Total loan cost	$31,138	$33,787

• How to use this car loan payment calculator

  1. Enter the amount you want to borrow to buy a new car under Loan amount. This might not be the same as the cost of your car, since many lenders require a down payment.
  2. Write the amount of time you have to pay off your car loan under Loan terms (in years). If your loan term is in months, divide it by 12 first.
  3. Enter the interest rate you expect to pay on a car loan under Interest rate. If your car loan comes with fees, enter the annual percentage rate (APR) instead.
  4. Click Calculate.

Besides your monthly payment, our car loan calculator breaks down how much you’d pay in interest and the overall cost of your loan. The principal is the amount that you borrowed. Interest is the amount paid on top of the principal, which is the cost of your loan.

Factors that influence credit union car loan rates

Several factors affect the rate you can qualify for with credit union auto loans, including:

• Credit score. You need to have a good credit score to get a favourable interest rate.
• Debt-to-income ratio (DTI). Your DTI is the percentage of your monthly income that goes to debt repayment. Having a low debt-to-income ratio means you can qualify for some of the best credit union car loan rates.
• New vs. used car. New car loans have lower rates than used car loans regardless of your creditworthiness.
• Vehicle make and model. Certain models may have special low rates, but you’ll need good or excellent credit to qualify.
• Loan term. Longer loan terms often come with higher interest rates.

What are the advantages of getting a credit union car loan?

Here are a few perks of taking out a car loan from a credit union:

• Competitive rates. You can find car loans or personal loans offering competitive APRs if you have good credit.
• Lower minimums. You can sometimes find car loans as low as several thousand dollars from credit unions, making it a better deal for a cheap private party purchase.
• Personalized service. Customer service is what most credit unions are known for. Credit unions often have the option to apply online, in person or over the phone. If this is your first time, you could benefit from having someone walk you through the process.

What are the disadvantages of credit union car loans?

Consider these potential drawbacks before applying for a car loan from a credit union:

• Slower turnaround. Like banks, credit unions can sometimes move slower than online or dealership financing.
• Membership required. Becoming a member adds another step to the car-buying process.
• Online applications not available. Some credit unions may require you to visit a branch to apply for car financing.

Bottom line

Credit union car loans can offer more competitive rates and terms than alternative lenders, especially if you have good credit. But it might not be the best choice if you’re looking for a fast, hands-off experience. Applying to become a member adds to the complexity.

Related: Explore car loan options in Canada

Credit union car loan FAQs

• Which credit unions offer car loans in Canada?

  The biggest credit unions in Canada that offer car loans include Vancity, Coast Capital, Servus, Desjardins, Prospera, Connexus, Access and Assinboine Credit Union.

• What credit score do I need to get a car loan from a credit union?

  You usually need good to excellent credit above 660 to get a credit union car loan.

• Can you get car loan refinancing from a credit union?

  Yes, you can, but it depends on the credit union. Not all credit unions offer car loan refinancing.

• Is it better to get car financing from a credit union or dealership?

  It depends on your needs. Credit unions are slower to fund car loans but offer competitive low rates for certain types of vehicles.

• Do credit unions check your credit when you apply for a car loan?

  Yes. Credit unions run a hard credit inquiry when you apply.