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Why more people are turning to credit unions for car loans

The average new car price is more than $47,000. Combine that with rising auto loans rates and it can be a tough bill to swallow.

INDIANAPOLIS — It is safe to say Matt McNeely is a car person.

"It doesn't matter if it's new, old. If it's got four wheels, I want to drive it," McNeely said. 

And because McNeely wants to drive a lot of cars, he works hard to find deals.

"Most car deals are anywhere between three and four weeks of my time," he said.

Not only is he looking for the best price on a car, but the best price on his finance agreement, too.

"You can actually save just as much with the negotiation of a car as you can on the finance side in some situations," McNeely said.

Before he steps on the dealer's lot, McNeely connects with banks and his credit union to figure out a fair loan rate.

Most recently, he went with his credit union.

"It equated about a $30 to $40 a month savings."

McNeely is far from the only person turning to a credit union.

Credit unions are financing more than 30% of all auto loans, according to Experian, leading the lending market share.

Melinda Zabritski with Experian said it's very difficult to beat the rates that the credit unions are offering right now.

That's because when interest rates went up, banks followed suit quickly. 

Credit unions, however, moved slower.

"You also see credit unions will tend to offer some slightly longer loan terms. So, between the combination of a longer term and a lower rate," Zabritski said, "that loan is going to go to the credit unions."

A credit union is a not-for-profit owned by its members that people need to join.

NerdWallet's auto loans expert Shannon Bradley said joining one isn't difficult.

"Many credit unions now have multiple ways to become a member," Bradley said. 

A bank doesn’t require an extra step of joining.

The average auto loan rate for a 48-month new car is 6.16%, according to Bankrate. Based on your credit score, that rate can go up or down.

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