final verdict
Getting a low auto loan rate can help you avoid spending more than you should on your new or used car. Before you start shopping for a vehicle, it’s important to get quotes from several different lenders. Consider checking out credit unions, banks, and private lenders for the best rates.
If you are unsure where to start, we recommend that you get a quote from PenFed Credit union. Although you must be a member, joining is easy and the credit union offers some of the lowest rates we’ve found along with flexible loan limits and repayment terms.
Compare the best car loan rates
| Lender | lowest rate | Amount of the loan | Terms |
|---|---|---|---|
| PenFed Credit Union Best overall | 4.44% | $500 to $100,000 | 36 to 84 months |
| LightStream best car loan online | 3.99%* with autopay and great credit | $5,000 to $100,000 | 24 to 84 months* |
| Bank of America Best bank for car loans | 3.59% | $7,500+ | 12 to 75 months |
| Consumer Credit Union Best Credit Union for Auto Loans | 2.49% | No minimum or maximum | 0 to 84 months |
| Automatic flush Ideal for used cars | Not announced | $4,000 to $600,000 | 12 to 84 months |
| in myAutoloan Ideal for bad credit | 1.90% | $8,000 to $100,000 | 24 to 84 months |
| AUTOMATIC PAYMENT Ideal for refinancing | 1.99% | $2,500 to $100,000 | 24 to 96 months |
| carvana Ideal for fair credit | Not announced | All the cars they sell | 36 to 72 months |
Auto loan rates by credit score
| Credit score | Average APR (new car) | Average APR (used car) |
|---|---|---|
| 781-850 | 2.34% | 3.66% |
| 661-780 | 3.48% | 5.49% |
| 601-660 | 6.61% | 10.49% |
| 501-600 | 11.03% | 17.11% |
| 300-500 | 14.59% | 20.58% |
Source: Experian: State of the automotive financing market Q2 2021
How do auto loans work?
Auto loans are secured loans. The loan is repaid in equal installments over a predetermined period of time. Generally, the vehicle you buy is used as collateralwhich means the lender can foreclose on the car if you don’t repay the loan.
What should you consider when choosing an auto loan?
In a recent interview with Kathryn J. Morrisona consumer affairs expert and professor at South Dakota State University, she said, “When shopping for a car loan, you need to consider more than just the interest rate. Are there any additional charges you will be charged? Do you need to have a deposit to qualify for this rate? What is the total loan amount and how much interest will you pay over the life of the loan? »
There’s a lot to consider when choosing an auto loan. Your credit score, for example, has a major impact on the rates you get. The best rates generally go to those with excellent credit. At the end of the second quarter of 2021, the average credit score was 732 for a new car loan and 665 for a used car loan, according to a report from Experian.
In Q2 2021, borrowers who received the lowest rates had a score of 781 or higher. These borrowers, also called super-prime borrowers, received an average APR of 2.34% for new cars and 3.66% for used cars. Prime borrowers with a credit score between 661 and 780 received an average APR of 3.48% for new loans and 5.41% for used loans, while non-preferred borrowers with a credit score of between between 601 and 660 received an average APR of 6.61% for new car loans and 10.49%. % for used.
It is also important to determine what duration corresponds to your financial situation. Longer terms generally result in lower payments, but cost more over the life of the loan.
How to get a car loan?
Some consumers may pay cash for a new vehicle, but most use financing from a bank, credit union, non-bank auto lender, or dealership. Here are the steps to follow to obtain a car loan:
- Check your credit report and correct any errors. Your credit score determines the interest rate you will receive.
- Shop with multiple lenders, including major banks, community banks, credit unions, and online lenders. Compare rates, terms, credit score requirements and other factors.
- Apply and get loan pre-approval from multiple lenders to see which offer is the best. Keep in mind that any credit application that happens within 14-45 days only counts as one application on your credit, so it’s best to do all of your loan shopping in a short period of time.
- Find your vehicle and compare the dealer’s financing offer to your pre-approval offer.
- Finalize the offer with your lender, following the instructions and completing the necessary paperwork to finalize the loan transaction. Make sure the loan is what you agreed. Check the APR, amount financed and finance charges before signing the loan.
Should you get a car loan from a bank or a dealership?
It’s worth shopping around at banks and dealerships for an auto loan. New car dealers and manufacturers, as well as banks, can offer attractive loan products. Depending on the borrower’s credit score and market circumstances, the interest rate offered by a car dealership can be as low as zero percent or lower than prevailing rates offered by banks.
It’s important to keep dealer financing as a possibility, but be sure to research auto financing before deciding where to buy a car. Know your credit score and research rates from banks and other lenders online. This should give you an idea of what to expect in the open market and help you determine if vendor financing is a better deal for you.
How long do car loans last?
It is common to see 24, 36, 48, 60 and 72 month car loans. Terms can be up to 84 months.
In the second quarter of 2021, the average new vehicle loan was 69.36 months.
Can you refinance a car loan?
Yes, many lenders offer auto loan refinance opportunities, and many promise to make the process quick and easy. It can be advantageous to refinance your loan in several different circumstances. For example, you might be able to improve your rate and monthly payments, shorten your loan repayment term, or extend the term if you’re having trouble making your payments.
Can you sell a car with a loan?
It is possible to sell a vehicle while you still have a loan, but this adds a few additional steps. There are different options in this situation. One option is to pay off the loan in full before selling the vehicle, which involves contacting your lender to determine your repayment amount. After repaying the loan, your lender will release the privilege.
You can sell a financed vehicle without paying it back by selling it to a private buyer or trading it in with a dealership.
What is the difference between a car loan and a personal loan?
It is possible to use a personal loan or a car loan to finance a vehicle, but the two differ in certain important points:
- Objective: Personal loans are unsecured or secured and can be used for many different purposes, including financing a vehicle, paying for a vacation, or making improvements to a home. Auto loans, however, are strictly for financing a vehicle and are secured by the vehicle you are purchasing. The vehicle serves as collateral.
- Interest rate: Auto loans being secure, auto loan rates are generally lower than those of personal loans.
- Availablity: Car loans are generally easier to obtain than personal loans, especially for those with bad credit histories.
Methodology
To select the lenders on this list, we evaluated loan offers from 25 different auto lenders using several criteria. First, we looked at auto loan rates, specifically APR, and the loan options available to borrowers. We also considered loan amount ranges, loan types offered, repayment term options, and credit score requirements. Only companies with a solid reputation were considered. Finally, we looked at each lender’s customer service satisfaction and national reach.