Media Contact: Barbara Fornasiero; EAFocus Communications; barbara@eafocus.com; 248.260.8466
Wyandotte, Mich. —January 13, 2025 — As the Detroit Auto Show returns to the city after a six-year-long winter show hiatus, the landscape has changed dramatically for auto loans, according to Michigan Legacy Credit Union CEO Carma Peters.
“A recent report lists the average car price in November 2024 as $48,724. Even with buyer incentives and discounts, that number is out of reach for many buyers, and credit unions and financial institutions have had to respond,” Peters said. “For starters, we lowered our interest rates by 1.5% on December 1, 2024, to ease the financial blow for our members, and increased the number of loans we offered beyond 60 months.”
Michigan Legacy Credit Union offers auto loans up to 84 months for higher loan amounts.
“Our average length of an auto loan at our credit union is between 36-60 months. We made a relatively quick jump from 60 months – five years – to now 84 months – 7 years, depending on the loan amount and the credit history of the borrower,” Peters said.
The average loan rate on a 36 to 60-months auto loan is 5.84%. In December, Michigan Legacy’s average loan amount was $21,835.96 – indicating that members are looking for more cost-effective loan payments that are better for their tightened budgets.
A key downside to an extended loan is the difficulty in trading it in for a different vehicle. The automobile begins to depreciate immediately, but the loan balance declines slowly.
“A new car typically depreciates 15% to 20% in its first year,” Peters notes. “At the beginning of a car loan, you usually have ‘negative equity’ in the vehicle: you owe more on it than it’s worth due to that depreciation. This situation is also known as being ‘upside down’ or ‘underwater.’ If you make a down payment that’s too small, you put yourself further underwater. And you go deeper still if you opt for a longer loan term.”
With rate decrease projections unreliable, Peters says the best way to secure a lower interest loan is to establish a relationship with a financial institution prior to loan shopping. For example, Michigan Legacy Credit Union members are allowed to use reward points to reduce their auto loan rates. She also urges smart car shopping. Peters recommends getting preapproved by your lender, that way you know the payment that fits your budget, before the sparkle of the new car hits you. In addition, Peters notes that credit unions offer products at a substantial discount compared to what one pays at the dealership.
“Nearly new can be the best option for some car shoppers,” Peters said. “A one- to two-year-old vehicle, perhaps a better model than what one could afford brand new, with 24,000 miles or less, will likely still have a factory warranty. Let someone else take the depreciation!”
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.
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