Your Comprehensive Guide to Auto Financing with Arizona Financial Credit Union

Oct 25, 2023

Are you dreaming of cruising down the open roads of Arizona in your very own car? Whether it's a sleek sedan, a rugged SUV, or a powerful truck, owning a vehicle can be a liberating experience. But for most of us, buying a car outright with cash isn't always possible. That's where auto financing comes into play, and Arizona Financial Credit Union is here to help you navigate the world of auto loans. 


Auto Financing Basics

Auto financing, in simple terms, is a way to purchase a vehicle without paying for it upfront in full. Instead, you borrow money from a lender, such as a credit union like Arizona Financial Credit Union, to buy the car. You then repay the borrowed amount over time, typically in monthly installments.

Types of auto loans

> New Car Loans: These loans are designed for purchasing brand-new vehicles. They often come with competitive interest rates and longer loan terms.

> Used Car Loans: If you're eyeing a pre-owned vehicle, a used car loan is the way to go. These loans might have slightly higher interest rates than new car loans but are still affordable.

> Refinancing: Refinancing allows you to replace your existing auto loan with a new one, ideally with better terms. This can help you lower your interest rate or extend your loan term to reduce monthly payments.

> Leasing: While not technically a loan, leasing allows you to drive a car for a set period, usually a few years, without the commitment of ownership. At the end of the lease term, you can often choose to purchase the car.

The down payment

When you take out an auto loan, you'll likely need to make a down payment. This is a lump sum of money paid upfront that reduces the loan amount. A larger down payment can lower your monthly payments and the overall cost of the loan.

Understanding Your Credit Score

Your credit score plays a crucial role in determining the terms of your auto loan. Lenders use it to assess your creditworthiness, and a higher credit score usually leads to better loan offers. 

The main credit bureaus (Equifax, Experian, and TransUnion) calculate your credit score based on your credit history, including payment history, outstanding debts, and more.

How your credit score affects auto financing

  • Excellent (750+): You're likely to qualify for the best interest rates and loan terms, potentially saving you thousands of dollars over the life of the loan.
  • Good (700-749): You'll still qualify for competitive rates and terms, but they may not be as favorable as those with excellent credit.
  • Fair (650-699): You might qualify for an auto loan, but expect higher interest rates and less favorable terms.
  • Poor (below 650): Getting approved for a loan can be challenging, and if you are, the interest rates will likely be high.

Improving your credit score

If your credit score isn't where you'd like it to be, there are steps you can take to improve it:

  • Pay bills on time.
  • Reduce outstanding debt.
  • Avoid opening unnecessary credit accounts.
  • Check your credit report for errors and dispute inaccuracies.

Research & Budgeting

Before you start shopping for a car, it's essential to set a budget. Consider factors like your monthly income, expenses, and the down payment you can afford. Make sure to account for not only the car's purchase price but also ongoing expenses like insurance, fuel, and maintenance.

Get Preapproved

Getting preapproved for an auto loan can be a game-changer. It helps you know how much you can spend, simplifies the negotiation process at the dealership, and can potentially lead to better loan offers. Arizona Financial Credit Union offers easy preapproval options to make this step a breeze.

Comparison Shopping

Don't settle for the first loan offer you receive. Shop around and compare offers from various lenders, including banks, credit unions, and online lenders. Look at interest rates, loan terms, and any additional fees.

Consider Loan Terms

The loan term is the length of time you have to repay the loan. While longer terms can result in lower monthly payments, they often lead to higher overall interest costs. Shorter terms mean higher monthly payments but less interest paid in the long run. Choose a term that aligns with your budget and financial goals.

Required Documentation

To apply for an auto loan, you'll need several documents:

  • Proof of income (pay stubs, tax returns, or bank statements)
  • Identification (driver's license, passport, or state ID)
  • Social Security Number
  • Vehicle information (make, model, year, and VIN)
  • Proof of insurance

Approval and Closing

Once you've submitted your loan application, the lender will review your information and credit history. If approved, you'll receive a loan offer detailing the terms and conditions. Review this carefully, and if everything looks good, sign the loan agreement. At this point, the lender will work with the dealership to finalize the purchase.

Making Payments

After you've secured your auto loan, it's crucial to make timely payments. Missing payments can harm your credit score and result in late fees. Set up automatic payments to ensure you never miss a due date.

Loan Payoff Options

If your financial situation improves, consider paying off your auto loan early. This can save you money on interest. Check with your lender for any prepayment penalties or fees.

Insurance Requirements

Most lenders require you to have comprehensive and collision insurance for the duration of the loan. Be sure to meet these requirements to protect your investment.

Refinancing Your Auto Loan

Refinancing is an option to consider if you want to change your existing auto loan terms. Here's when you might consider refinancing:

  • Interest Rates: If interest rates have dropped since you took out your loan, refinancing can help you secure a lower rate.
  • Monthly Payments: If you're struggling with high monthly payments, refinancing can extend the loan term, reducing your monthly expenses.
  • Better Credit: If your credit score has improved since getting your initial loan, you might qualify for better loan terms.
  • Change in Finances: If your financial situation has changed, refinancing can help you adjust your loan terms to better fit your current budget.

Extended Warranties

Consider purchasing an extended warranty to protect against unexpected repair costs. Many credit unions, including Arizona Financial Credit Union, offer competitive rates on extended warranties.

GAP Insurance

Guaranteed Asset Protection (GAP) insurance covers the difference between your car's value and the remaining loan balance in case of theft or a total loss. It's especially useful if your car depreciates faster than you're paying down the loan.

Regular Maintenance

To ensure your vehicle runs smoothly and retains its value, stick to a regular maintenance schedule. This includes oil changes, tire rotations, and brake inspections.

Why Choose Arizona Financial Credit Union?

Member-Centric Approach

Arizona Financial Credit Union is committed to serving its members' financial needs with a member-first approach. As a not-for-profit institution, our goal is to provide competitive rates and personalized service to help you achieve your financial goals.

Competitive Auto Loan Rates

We offer some of the most competitive auto loan rates in the market. Whether you're buying a new or used car, our rates are designed to save you money.

Easy Application Process

Applying for an auto loan with us is simple and convenient. You can apply online, in-person, or over the phone, making it easy to get the financing you need.

Financial Education

We believe in empowering our members with knowledge. That's why we provide resources like this comprehensive guide to help you make informed financial decisions.

Navigating the world of auto financing can be complex, but with the right knowledge and support, you can make the process smoother and more affordable. At Arizona Financial Credit Union, we're here to help you every step of the way, from pre-approval to paying off your loan.

So, when you're ready to hit the roads of Arizona in your dream car, remember that auto financing doesn't have to be daunting. With the right lender and a clear understanding of the process, you can confidently drive off into the sunset in the vehicle of your dreams.