Credit unions enjoy a consultative relationship with their members. For those members who are considering purchasing a vehicle in 2025, well-trained auto loan staffers can play an important role in counseling members on important financial, tax, and much-needed protection products that save money and increase the value of their purchase.
Changes to loan rates, complex tax deductions, and continued concerns about economic conditions mean purchasing a vehicle these days is more than choosing a make and model. EFG encourages both credit unions and their dealer partners to work closely with buyers to craft the best deal possible for all involved.
Strategic Planning Now Can Deliver Savings Later for Members
While it’s only September, many consumers are contemplating their major purchases for the remainder of the year. Concerns about employment, persistent inflation, and rising interest rates are prompting Americans to take a closer look at budgets, vacations, and holiday spending. Changes to lender requirements, tax deductions, and credit scores add to the bottom-line impact. We encourage our credit union partners to proactively engage with members who might consider buying a vehicle in 2025 to provide some informed guidance.
A recently enacted tax law states interest paid on loans for new vehicles assembled in the U.S. will qualify for a deduction on federal tax returns beginning in 2025. The new deduction applies annually at tax time. It covers all new vehicles regardless of whether they are gas-powered, hybrid, or electric, as long as they are built domestically. Leases and used cars are excluded.
But there are some key factors for members to consider. Popular models like the Ford F-150, Jeep Grand Cherokee, and Tesla Model Y meet eligibility requirements, while more affordable vehicles such as the Nissan Versa, Chevrolet Trax, and Hyundai Elantra are not eligible since they are assembled abroad.
Also, the deduction is limited by income. Single taxpayers earning under $100,000 or married couples earning under $200,000 will qualify for the full benefit. The amount of the deduction should also be considered. Based on average loan amounts and interest rates from Experian, the deduction could be worth approximately $576 in the first year, reducing to around $36 in the sixth year of a standard loan term. The total value depends on factors such as income and the marginal tax rate.
Vehicle Affordability Continues to Be a Barrier for Buyers
While the intent of the tax deduction is to boost sales of U.S.-made cars and trucks, vehicle affordability remains a question since the average new vehicle now costs nearly $50,000. “Affordability is the dominant theme at the midpoint of 2025, and it has implications across nearly every other issue facing the automotive industry,” Dave Cantin Group (DCG) president Brian Gordon said in a news release accompanying the firm’s 2025 Midyear Market Outlook Report. DCG, which compiled the report with Kaiser Associates, pointed to high interest rates, flat wage growth, indications of a jobs slowdown and uncertainty around tariffs — all despite an economy that has “has held up well this year.”
Edmunds reports that average car loan interest rates are 7.30% for new cars and 10.90% for used cars as of June 2025. This represents a small increase in new car rates and a slight decrease for used car rates since the beginning of the year. However, lenders closely evaluate consumer credit scores, rating them as a major influence on car financing rates. According to Experian, the average new car loan rate dropped to 9.06% in July, down 27 basis points (bps) from June. The news is even better for top-tier credit (760+), rates are as low as 5.4%, the lowest since September 2022. And for those with prime credit rates, many are capturing a 0% APR loan. Buyers with lower scores could pay 15.81% APR or more – and might struggle to qualify for a loan.
Bottom line – there are a lot of variables! And credit union members are thirsty for more information to help them make an informed buying decision. Education – credit unions’ cornerstone value proposition – is the key opportunity. Rather than focusing on interest rates, guide buyers to focus on their credit score. A one-tier improvement in credit score (~100 points) can unlock better loan terms. Credit unions that counsel their members to optimize their financial position prior to purchasing a vehicle will not only support their members, but they will also increase the strength of their auto loan portfolio and gain market share versus banks and captives.
Counseling Improves Vehicle Value and Member Satisfaction
Vehicle purchase decisions involve more than make and model. The overall value of the vehicle over its lifetime should be considered as well. Credit union auto loan advisors who lean into their innate role of financial counselor are needed to help members make the best decision.
For today’s consumers, protecting their expensive investments comes naturally. Digital devices and costly appliances all have warranties and protection products attached to them. These expensive vehicles are no different. While manufacturers’ warranties are included with new vehicles, they come with term and mileage limits. As consumers keep their vehicles long past those milestones, repairs to the powertrain, battery, and other components are costly.
Attaching F&I repair and protection products to the loan will protect the value of the vehicle, keeping it on the road longer and guard against unexpected repair bills which can be financially devastating for a member. EFG’s complimentary Drive Forever® Worry Free gives members confidence to purchase the vehicle and comfort that they can drive without worry for as long as they own the car.
Debt protection tools such as WALKAWAY® are great options to safeguard the loan while easing a member’s potential financial concerns. Credit unions that include a complimentary WALKAWAY® waiver with every new and used auto loan or lease give members a compelling reason to build a lasting and profitable relationship with your institution.
As economic concerns continue to be top of mind for consumers, members who are purchasing a vehicle could use an advocate in their corner, ready to inform and educate them. A frank, honest discussion with a well-trained lending team member can mean the difference between a deal or no deal.
Credit unions are a wealth of valuable knowledge and have the right tools to support members. Informed, well-trained auto lending team members can counsel members on the best way to maximize the value of their purchase. At EFG Companies, we’re more than an F&I provider, we’re your trusted business partner in auto lending. Together, let’s all make more in 2025.
Connect with author Brien Joyce on LinkedIn, or contact him directly at bjoyce@efgusa.com or 770-843-4025.