Best Auto Loan Rates and Financing for August 2024 (2024)

For many people, getting an auto loan is a crucial step in the car buying process: Over 80% of new cars and over 37% of used cars were financed in Q1 of 2024. No matter the price of the car, the interest rate of your loan plays a major part in the overall cost you pay. Dealerships will often try to sell you on a loan through their partners, and you may find a good deal this way.

But you might save thousands over the course of the loan if you can find a better rate yourself through an independent lender, so it's worth shopping around. We've ranked the top auto loan lenders here to help you find the best rate you can get.

PenFed Credit Union is the best overall auto loan lender thanks to its wide selection of loan types and competitive rates, according to our research. It offers rates for used car loans as low as 6.49%, and another one of our picks, OpenRoad Lending, offers refinance rates as low as 1.99%.

We reviewed 21 auto loan lenders and collected the best new, used, and refinance auto loan rates, evaluating APRs, loan types, loan terms, vehicle and borrower requirements, and other factors. We also surveyed 1,016 auto loan borrowers, asking how they felt about specific lenders and the loan process.

Best Auto Loan Rates and Financing for August 2024

Best Auto Loan Rates and Financing for August 2024

Best Auto Loan Rates and Financing for August 2024

  • Our Top Picks
  • PenFed
  • AUTOPAY
  • Consumers Credit Union
  • LendingTree
  • LendingClub
  • Carvana
  • OpenRoad Lending
  • See More (4)
  • The Bottom Line

  • Why You Should Trust Us

  • Compare Best Auto Loan Lenders

  • How to Choose

  • How to Apply

  • Auto Loan Calculator

  • Pros and Cons

  • FAQs

  • Other Auto Loans

  • Guide to Auto Loans

  • Methodology

Best Overall : PenFed

Best Auto Loan Rates and Financing for August 2024 (1)

  • Used APR Range: 6.49%–17.99%
  • Used Loan Amounts: $500–$150,000
  • Minimum Recommended Credit Score: Not disclosed

Pros & Cons

Pros

  • Full suite of auto loan types available

  • Allows private-party vehicle purchases

  • Promotional offers if you use car-buying service

Cons

  • Must join credit union

  • Doesn’t allow co-signers

  • No rate discounts available

Why We Chose It

PenFed is our top pick overall for auto financing because it offers all of the loan types you’d ever hope to use, and offers competitive rates: loans for new or used cars, refinances, cash-out refinances, and even lease buyout loans. You can even get a used car loan to buy a car from a private seller.

PenFed will mail you a check if you’re approved for any of its loans. That can take a few days, but if you’re OK with using the TrueCar car-buying service, PenFed offers a pretty good relationship discount. Your loan could be funded the same day you’re approved, if you use this service.

PenFed's customer service is available by phone or secure online message. PenFed has been in business since 1935, and has headquarters in McLean, Virginia.

Read our full PenFed Auto Loans Review for more information.

Terms and Borrower Qualifications

  • Used loan terms: 3–7 years
  • Available in all 50 states and Washington, D.C.
  • Must join the credit union by depositing at least $5 in a savings account.

Vehicle Qualifications

  • For loans less than seven years: No limit on vehicle age, and must have 125,000 miles or fewer
  • For loans of seven years or more: Vehicle must be less than five years old and be under 60,000 miles
  • Maximum loan-to-value ratio: 125%
  • Allows private-party vehicle purchases: Yes

Best for Bad Credit/Low Rates : AUTOPAY

Best Auto Loan Rates and Financing for August 2024 (2)

  • Used APR Range: As low as 5.69%
  • Used Loan Amounts: $2,500–$100,000
  • Minimum Recommended Credit Score: 500

Pros & Cons

Pros

  • Relatively low rates

  • No payments for 45 days

  • Low minimum credit score requirement

Cons

  • Very sparse on loan details

  • Doesn’t disclose partner lenders

  • Can’t apply with a co-signer, only a co-borrower

Why We Chose It

AUTOPAY is a loan aggregator and it's a bit light on the details; maybe intentional in order to get you to bite. If you have excellent borrower qualifications, AUTOPAY certainly has the potential to be one of your cheapest financing options, advertising some of the best car loan rates today compared to other lenders and aggregators.

It's our top pick for bad credit because it works with borrowers with credit scores as low as 500; but it doesn’t specify the top end of the rate range you’d be likely to pay if you have poor credit, so you’ll need to be careful—especially since you can’t apply with a co-signer (only a co-borrower).But, if you do have good credit, you may enjoy some very good interest rates.

AUTOPAY does offer a full suite of auto loan types: used cars, new cars, refinances, cash-out refinances, and even lease buyout loans. It works with a network of partner lenders rather than offering the loans itself, and that’s how it can offer so much flexibility. For that reason, it’s a good choice to add to your shopping list, although we would prefer if it offered more concrete details.

AUTOPAY was founded in 2007, and is based in Denver, Colorado. You can get in touch with the company by phone or online message. Read more in our full AUTOPAY auto loans review.

The best auto loan rates are often advertised through third-party companies that network with partner lenders, like AUTOPAY. Most don’t disclose their partners, however, so you can’t always see all of the companies you’re actually checking your rates with.You may need to sign up for automatic payments to get the best rates, as well.

Terms and Borrower Qualifications

  • Used loan terms: 2–8 years
  • Recommened credit score of 500 or higher
  • Available in all U.S. states and Washington, D.C.

Vehicle Qualifications

  • Maximum accepted vehicle age: 10 years
  • Maximum accepted mileage: 150,000 miles
  • Maximum loan-to-value ratio: Not disclosed
  • Allows private-party vehicle purchases: Yes

Best Credit Union : Consumers Credit Union

Best Auto Loan Rates and Financing for August 2024 (3)

  • Used APR Range: As low as 6.84%
  • Used Loan Amounts: $500–$350,000
  • Minimum Recommended Credit Score: Not disclosed

Pros & Cons

Pros

  • Allows co-signers

  • No age or mileage restrictions

  • Offers a full suite of car loan options

Cons

  • Can only be used at a dealership

  • Must join credit union to receive loan

  • Lack of transparency about loan requirements

Why We Chose It

As our highest-rated credit union, Consumers Credit Union is a good choice for people who prefer to bank with these financial institutions. It’s also a good choice if you’re trying to buy an older car from a dealership because it’s one of the few lenders that doesn’t put any limits on your vehicle’s model year or mileage.

Consumers CU also offers an optional mechanical repair insurance plan through ForeverCar, which might be especially important if you are driving an older car.It also has a relatively low minimum loan amount.

Consumers CU doesn’t specify what sort of credit history you need to qualify for a loan (or any other qualifications, really), but it might be good to add this one to your shopping list if you have bad credit. The maximum rate you’ll pay for a refinance loan, for example, is about half of what some other lenders may charge.

Customer support is available by phone, email, or live online chat.

Consumers Credit Union was chartered in 1930, and has corporate headquarters in Round Lake Beach, Illinois. Learn more in our full Consumer Credit Union Auto Loans Review.

Terms and Borrower Qualifications

  • Used loan terms: 36–84 months
  • Available to people living in all 50 states and Washington, D.C.
  • Need to join Consumers Cooperative Association ($5 fee) and deposit $5 in a savings account to establish your membership, if approved for a loan

Vehicle Qualifications

  • Maximum accepted vehicle age: None
  • Maximum accepted mileage: None
  • Maximum loan-to-value ratio: 125%
  • Allows private-party vehicle purchases: No

Best for Refinance : LendingTree

Best Auto Loan Rates and Financing for August 2024 (4)

  • Refinance APR Range: As low as 5.99%
  • Refinance Loan Amounts: Not disclosed
  • Minimum Recommended Credit Score: Not disclosed

Pros & Cons

Pros

  • Potential for very low rates

  • Compare many refinance loan offers at once

  • No limits on age or mileage of vehicle

Cons

  • Can generate a lot of spam

  • Very low loan-to-value ratios

  • Doesn’t offer many details about its loans

Why We Chose It

LendingTree is another company that can help you quickly identify the best financing rates from among its network of lenders. It suffers from the same problems as other lender networks, however—namely, that it doesn’t tell you which lenders it’s checking your rates with, nor what the types of loans you might qualify for look like. You can also expect a lot of companies reaching out to you with spam, too.

Still, it’s a great option if you’re looking for a car loan refinance, advertising competitively low rates. You’ll just need to make sure you have plenty of equity in your vehicle since LendingTree lenders don’t offer loans with a loan-to-value ratio above 80%. That means underwater loans aren’t eligible for refinance.

You can contact LendingTree by phone, but if you used LendingTree to get a loan with a partner lender you'll likely need to contact that lender instead.

LendingTree was founded in 1996, and now has headquarters in Charlotte, North Carolina. Read more in our full LendingTree Auto Loans Review.

Terms and Borrower Qualifications

  • Refinance loan terms: 36–72 months
  • Available to residents of all 50 states and Washington, D.C.

Vehicle Qualifications

  • Maximum accepted vehicle age: None
  • Maximum accepted mileage: None
  • Maximum loan-to-value ratio: 80%
  • Allows private-party vehicle purchases: Not disclosed

Best for Fair Credit : LendingClub

Best Auto Loan Rates and Financing for August 2024 (5)

  • Refinance APR Range: 4.99%–24.99%
  • Refinance Loan Amounts: $4,000–$55,000
  • Minimum Recommended Credit Score: 600

Pros & Cons

Pros

  • Minimum recommended credit score of 600

  • No loan fees

  • Can refinance with the same lender

  • Low rates for well-qualified borrowers

Cons

  • Doesn’t allow co-signers

  • Many residency and car restrictions

  • Doesn’t offer new or used auto loans

Why We Chose It

LendingClub, the former peer-to-peer lender, is now in the auto refinance business where it offers very good rates to borrowers with good credit. Borrowers with fair credit can be approved too—making it our top pick for this category, along with its high overall score as well—but if your credit is quite bad LendingTree may charge you a higher rate than most other lenders. On the bright side, LendingClub doesn’t charge any fees—origination fees, late fees, prepayment penalties, nothing.

LendingClub is one of a handful of lenders that allow you to refinance your current LendingClub loan with another LendingClub loan, if you happen to qualify. However, be aware that there are many loan limitations with this lender. It’s not available in many sparsely populated states, for example, and there are many makes and models of popular cars LendingClub won’t finance.

LendingClub was incorporated in 2007, and it's headquartered in San Francisco, California.

If you're dealing with less-than-perfect credit, see our picks for the best auto loans for fair credit to explore further options.

Terms and Borrower Qualifications

  • Refinance loan terms: 2–7 years
  • 600 or higher recommended credit score
  • Current auto loan must have been open for at least one month
  • Current auto loan must have at least 24 months remaining
  • Available to residents of all U.S. states except for: Alaska, District of Columbia, Hawaii, Maine, New Hampshire, North Dakota, Vermont, West Virginia, Wyoming
  • You must be at least 18 years of age
  • You must be a U.S. citizen or permanent resident or live in the U.S. on a valid long-term visa

Vehicle Qualifications

  • Maximum accepted vehicle age: 10 years
  • Maximum accepted mileage: 120,000 miles
  • Maximum loan-to-value ratio: Not disclosed
  • Allows private-party vehicle purchases: No

In addition:

  • The loan’s remaining balance must be between $5,000 and $55,000
  • Can’t refinance business vehicles
  • Vehicle must be registered in the same state you live
  • Many cars not eligible for financing, such as Nissan Leafs and models from Suzuki, Saturn, Mercury, Saab, Pontiac, Oldsmobile, Hummer, and more

Best for Full Car Buying Experience : Carvana

Best Auto Loan Rates and Financing for August 2024 (6)

  • APR Range: Not disclosed
  • Loan Amounts: Not disclosed
  • Minimum Credit Score: 500

Pros & Cons

Pros

  • Neat, techy way to buy a car

  • Offers seven-day return policy

  • Long 45-day pre-approval window

Cons

  • Not available outside of contiguous U.S.

  • Doesn’t allow co-borrowers, only co-signers

  • Delivery charges not refundable if you return car

Why We Chose It

Carvana is a used car dealership that offers a completely online car-buying experience, similar to TrueCar; it's our highest-rated company that offers this service.

You can apply for an auto loan online, find a car, and then pick it up or even have it delivered to you.

One of Carvana’s claims to fame, however, is its car vending machines. If you’re pre-approved for a loan you can schedule an appointment to take a car for a test drive from one of its giant vending machines. The company will even provide you with a token to use.

If you like the car, you can keep it. If not, you’ll have seven days to return it.

It’s a futuristic way to buy a car that many people like; however, there can be problems with the setup. If you have a car delivered and you don’t like it, for example, you can return it, but the shipping charge is nonrefundable. That makes it costly and impractical to test drive different models like you would at a dealership.

Carvana's customer support team is available by text or by live chat on the website. The company was founded in 2012, and is based in Tempe, Arizona. Learn more in our full Carvana Auto Loans Review.

Terms and Borrower Qualifications

  • Loan terms: Not disclosed
  • Minimum recommended credit score of 500
  • Must be at least 18 years old
  • Minimum annual income of $4,000
  • Must not have any active bankruptcies
  • Available to residents in contiguous U.S.

Vehicle Qualifications

  • Maximum accepted vehicle age: Varies
  • Maximum accepted mileage: 140,000 miles
  • Maximum loan-to-value ratio: Not disclosed
  • Allows private-party vehicle purchases: No (only for used cars bought through the Carvana platform)

Best for High Maximum Accepted Mileage : OpenRoad Lending

Best Auto Loan Rates and Financing for August 2024 (7)

  • Refinance APR Range: 1.99%–24.99%
  • Refinance Loan Amounts: $7,500–$100,000
  • Minimum Recommended Credit Score: 500

Pros & Cons

Pros

  • Maximum accepted mileage of 160,000, according to customer service

  • Offers lease buyout loans

  • Refinancing available if you’re underwater on loan

  • Can re-refinance your loan through OpenRoad again

Cons

  • Potentially high rates and fees

  • Doesn’t allow co-signers

  • Many vehicle restrictions

Why We Chose It

OpenRoad Lending’s website looks like it was designed in the previous decade. But it can be helpful if you’re struggling to make your auto loan payments and you’re not able to qualify for a better loan with another lender—especially if you need to refinance a loan for a high-mileage car, because OpenRoad Lending's 160,000 mile-limit is the highest disclosed limit among lenders we reviewed.

It comes with very high origination fees ranging from $249 to $449, a 5% late payment fee, and interest rates that zoom into credit-card-debt territory for less-qualified borrowers.

However, OpenRoad Lending is still better than many other types of alternative auto loans, such as those from buy-here-pay-here lenders. You can still qualify if you have a poor credit score, even if you’re underwater on your current loan—a common problem for people with bad car loans.

OpenRoad Lending has a maximum loan-to-value ratio of 180%, meaning you may be able to borrow nearly twice your car’s actual value in order to pay off your existing loan—far more than most other lenders.

OpenRoad Lending was founded in 2009, and is based in Fort Worth, Texas.

If you need help, you can get in touch with OpenRoad by phone or email. Read more in our full OpenRoad Lending Auto Loans Review.

Terms and Borrower Qualifications

  • Refinance loan terms: 24–72 months
  • Minimum credit score of 500
  • Must be at least 18 years old
  • Available to residents in 46 U.S. states
  • You must make at least $2,000 per month (earnings from Uber or similar services do not count toward the income requirement)
  • Your DTI cannot exceed 40%
  • Can only refinance auto loans issued by NCUA- or FDIC-insured lenders such as credit unions and banks

Vehicle Qualifications

  • Maximum accepted vehicle age: Not disclosed
  • Maximum accepted mileage: 160,000 miles
  • Maximum loan-to-value ratio: 175%
  • Allows private-party vehicle purchases: No
  • Business vehicles, Oldsmobile, Daewoo, Smart Car, and Isuzu vehicles are not eligible for refinancing

The Bottom Line

If you’re looking for the best overall auto loans, try starting with PenFed; it's a credit union, but anyone can join for just $5 when approved for a loan. AUTOPAY is worth checking as well, especially if you'd like to browse a variety of lenders. LendingTree is also a top choice for a rate-comparison website. If you prefer sticking with credit unions, Consumers Credit Union is yet another good option that allows anyone to apply.

Or, if you’re not too picky about your car and prefer a more streamlined experience, Carvana offers some unique and affordable financing options. And finally, while expensive, OpenRoad Lending offers a lot of potential if you’re looking to get out of a car loan with a high rate.

Why You Should Trust Us

Investopedia collected 1,176 key data points from 21 companies across three months to identify the most important factors for readers choosing an auto loan. We used this data to review each company for interest rates, loan requirements, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best auto loans since 2020.

Compare Best Auto Loan Lenders

CompanyUsed APR RangeUsed Loan AmountsUsed Loan TermsMin. Rec. Credit Score
PenFed Best Overall6.49%–17.99%$500–$150,0003–7 yearsNot disclosed
AUTOPAY Best for Bad Credit/Low RatesAs low as 5.69%$2,500–$100,0002–8 years500
Consumers Credit Union Best Credit UnionAs low as 6.84%$500–$350,00036–84 monthsNot disclosed
LendingTree Best for RefinanceAs low as 5.99% (Refinance)Not disclosed36–72 months (Refinance)Not disclosed
LendingClub Best for Fair Credit4.99%–24.99% (Refinance)$4,000–$55,0002–7 years (Refinance)600
Carvana Best for Full Car Buying ExperienceNot disclosedNot disclosedNot disclosed500
OpenRoad Lending Best for High Maximum Accepted Mileage1.99%–24.99% (Refinance)$7,500–$100,000 (Refinance)24–72 months (Refinance)500

Looking for a specific type of loan? See our top picks for auto loans in a variety of categories:

  • Best Used Car Loans
  • Best Car Loans for Bad Credit
  • Best Auto Refinance Loans
  • Best Private Party Car Loans
  • Best Motorcycle Loans
  • Best RV Loans

Guide to Choosing the Best Auto Loan Rates and Financing

What Is an Auto Loan and How Does It Work?

An auto loan is an installment loan used to buy a new or used car, or to refinance an existing auto loan. Auto loans are usually secured, which means the vehicle serves as collateral for the loan. If you fail to make monthly car payments as agreed, the lender can seize the vehicle.

You can use a personal loan to make a car purchase, but secured auto loans typically have lower rates because lenders have more security if you don't pay as agreed.

Auto loan lenders may allow you to borrow more than the purchase price of the car, to account for taxes, fees, dealer upgrades, and other add-ons.

Like other installment loans, when you borrow money with an auto loan the funds are provided in a lump sum. The borrower makes equal monthly installment payments until the term loan is paid off. The money is lent at interest, so the borrower ends up paying back more than they originally borrow.

Auto Loan Rates

Longer loan terms may come with a lower monthly payment and lower annual percentage rates (APRs), but don't be fooled. In general, it's best to choose the shortest term and the highest monthly payments you can afford.

Although long-term loans may come with lower monthly payments, making them more affordable on a month-by-month basis, shorter-term loans will make the overall cost less expensive because you accrue less interest. When the loan is fully paid off, the vehicle belongs to the borrower (instead of the lender).

Where To Get an Auto Loan

Auto loans are available from traditional banks, online banks, credit unions, and lending marketplaces (which partner with banks and credit unions). You'll find new, used, and refinance auto loans from all of those sources, although some lenders only offer certain loan types; some lenders offer special deals for first-time car buyers, as well.

Auto loans are also available through dealerships that partner with banks; in some cases you may find lower rates through a dealership, but it's worth getting pre-approved with lenders on your own to see what kind of rates you can get. Then, you can go to the dealership with some bargaining power—see if the dealer will beat the best rate you found on your own.

Learn more in our expert explanation of how auto loans work.

Types of Auto Loans

Some people choose the type of car they get based on the type of loan they'd like. For example, new cars are more expensive, but the loans are often much cheaper than for used cars—and that’s one reason many people prefer new cars over used cars.

  • New car loan: Just about every lender offers new car loans. They feature lower rates and may come with longer term lengths since you’ll likely be financing a car that costs more, given the higher price tag for new cars.
  • Used car loan: Equally common, the rates on used car loans are generally a bit higher. Lenders may have more restrictions in place for loan approval, such as only being able to buy used cars from dealerships or cars below a certain age or mileage level.
  • Auto loan refinance: Many lenders offer refinance loans, which are used to pay off your current loan contract, replacing it with a new one. You might do this to get lower monthly payments and/or to pay off your loan faster while saving money.
  • Cash-out refinance: A cash-out refinance works the same as above, except you borrow a higher amount of money than you need. You get the difference back as cash that you can use for other things, like home repairs or debt consolidation.
  • Auto title loan: These are similar to payday loans except your paid-off (or mostly paid-off) car serves as loan collateral. Auto title loans are extremely expensive and difficult to repay, resulting in some borrowers having their car repossessed, so we don't recommend them.
  • Buy-here-pay-here loan: These dealerships market to people with bad credit. Your car may come installed with a tracking device to make it easier to repossess, and you may be charged exorbitantly high rates. We don’t recommend buy-here-pay-here loans.
  • Lease buyout loan: It can be difficult and expensive to get out of a car lease contract early so you’ll need to calculate the costs for all of your options carefully. If you can’t pay cash, some lenders offer a lease buyout loan for this purpose.
  • Private party auto loan: A private party auto loan is used to purchase a vehicle from a private seller—i.e., not a car dealership or business. Only some lenders provide loans for private party purchases.
  • Bad credit car loans: Some lenders offer auto loans of various kinds for people with poor credit; these loans are just like any other kind of loan, but they typically come with higher interest rates and fees.

Auto loans can either be secured or unsecured. Most auto loans are secured by the very car you’re buying and offer lower rates because of that. Your car serves as collateral for the loan and if you don’t repay it, the lender will repossess your car.

Unsecured car loans aren’t as common, but some lenders (like LightStream) do offer them. They’re often faster to get but they charge much higher rates because the lender doesn’t have an easy way to get their money back if you default.

How to Get the Lowest Interest Rates On Your Auto Loan

Auto loan rates depend in part on the federal prime rate, but the borrower's qualifications play a large role as well.

  • Shop around: Different lenders offer different interest rates; seek out lenders with low minimum APRs and get pre-approved to check your rates.
  • Build your credit: There are many ways to improve your credit score—some can be quick, like reducing your credit utilization, while others can take some time, like building up a history of on-time payments.
  • Increase your income: Having more money available (either for a down payment or for monthly payments) can improve your odds of getting a good rate.

Pre-Qualification vs. Pre-Approval

When it comes to auto loans, pre-qualification and pre-approval usually mean different things. But it's important to realize that some lenders and advice columns may use the terms interchangeably.

Pre-qualification generally involves a lighter, less extensive check than pre-approval. Pre-qualification may only require some basic personal information, and the lender may perform a soft credit check, which has no effect on your credit score. Information provided for a pre-qualification won't be verified by the lender—it's just meant to give you an idea of the rate you may qualify for.

Pre-approval involves a more in-depth check of your credit and finances. It typically requires a hard credit check, which can slightly affect your credit, and the lender may ask for more information and documentation. The lender may attempt to verify the information, as well.

Neither pre-qualification nor pre-approval means that you're guaranteed to be approved.

What Are Predatory Auto Loans?

In general, predatory lending refers to loans with unfair, deceptive, or abusive terms. These loans may offer borrowers worse terms than they deserve, based on their credit rating, or they may have exorbitantly high fees and/or high interest rates. Predatory lenders may exploit borrowers with aggressive tactics, or they may be outright deceptive.

Borrowers who lack sufficient understanding are encouraged to take out loans that they likely can't pay back. Lenders might charge high upfront fees so they can make money before the loan defaults.

Beware of subprime auto loans, car title loans, buy-here-pay-here loans, and payday loans. These may come with very high costs that are above typical market rates.

Signs of Predatory Auto Loans

  • Lack of credit check: This isn't always a sign of a predatory loan, but lenders may offer loans with no credit check to entice borrowers who wouldn't otherwise be able to qualify.
  • Loan packing: If you get a loan through a dealership, in some cases the dealership may include unwanted add-ons or services that increase the overall cost of the loan. These add-ons may even be added to the terms without your knowledge. Be sure to read the contract and fine print carefully before signing a car loan contract.
  • High-pressure sales tactics: Car salespeople are known for their sales tactics, but the final decision to sign any paperwork is up to you. Once again, be sure to read the fine print carefully. Come to the dealership or auto loan lender with your own plan in mind, and don't allow yourself to be pressured into buying anything you don't want or can't afford.
  • Above-market APRs or fees: Make sure you understand the full cost of the loan, including any closing costs and the costs of any extra features or services, the APR, the upfront and monthly payments you'll have to make, and the term length of the loan. Taking the time to shop around with different auto loan lenders can help ensure you find the best deal possible for your financial and credit situation.
  • Yo-yo auto loans: A "yo-yo" loan is when a dealership entices you with a certain set of terms, perhaps allowing you to test drive a car and get used to the idea of owning it, but later reneges on the agreement and says you have to sign new, worse terms—such as a higher APR—or you won't be able to get the vehicle.
  • Extra-large down payments: Car purchases (as opposed to leases) usually require a down payment, but if a lender or dealership requires a very large down payment (such as 40%–50% of the car value) they may be trying to get as much money out of you as quickly as possible because they suspect you may default on the loan.
  • Balloon payments: Balloon payments are extra-large required payments that come at the end of a loan term. These help make the previous monthly payments smaller, making the loan more attractive, but they can come as a surprise and in some cases people may not be able to pay them.
  • Asset-based lending or equity stripping: Rather than offering a loan using the vehicle as collateral, as usual, a lender may want you to borrow against some other equity you hold, such as your home. The lender can collect upfront fees and monthly payments, and then if you fail to pay back the loan as agreed, they can claim the equity used as collateral for the loan.

Auto Loan Rates by Credit Score

Credit Level/ScoreUsed Car LoansNew Car Loans
Super Prime: 781–8506.80%5.38%
Prime: 661–7809.04%6.89%
Nonprime: 601–66013.72%9.62%
Subprime: 501-60018.97%12.85%
Deep subprime: 300–50021.57%15.62%

How to Apply for an Auto Loan

  1. You can get an auto loan from several different types of lenders: online lenders, banks, and credit unions. Dealerships themselves also partner with these lenders to offer you financing.
  2. It’s best to do your loan shopping before you actually start looking for a car, because you can take the time to find the best loan options and you’ll have more bargaining power when you do find the car you want.
  3. Each lender will check two things in order to approve your loan: your financial situation and the car you want to buy.
  4. You can start the loan shopping process by getting pre-approved with multiple lenders. This may require a hard credit inquiry, in some cases. Chances are, some lenders will offer lower rates than others.
  5. If you’re pre-approved based on the initial details you provide, including personal details like Social Security number and some financial details, the lender will let you know what rates and terms you’re likely to qualify for.
  6. Lenders look for a few things. Your credit score, income, and debt payments are three of the most important factors, so it’s a good idea to clean up your credit in advance if it needs work and you have the time. Consider ways to reduce your debt-to-income ratio.

If you’re not able to qualify on your own and you have someone who’s willing to help, applying with a co-signer can improve your odds of qualifying for a loan.

“When my wife and I were shopping for a car last year, we prepared by getting a pre-qualification from our bank—Bank of America. We did it online, through our account portal. It was really easy, and because we have several accounts with BofA,we qualified for a rate discount. We planned on using the pre-approval as a negotiating tool, and figured the dealer would offer a better rate. To our surprise, the dealer couldn’t beat it. So now we have yet another account with BofA.” — Lars Peterson (Investopedia Senior Editor, Financial Products and Services).

Once you find the car you want, you can provide the details to your chosen lender and submit a full loan application. The lender will usually disburse the loan funds directly to you, either by check or bank deposit. In some cases lenders may send the money directly to dealerships; for refinance loans, lenders may send the money directly to the current holder of your loan.

Your new lender will provide you with details on how to set up an account, manage your loan, and make payments.

Auto Loan Calculator

See how much car you can afford with our auto loan calculator; plug in your details, and you can see how big your monthly payments will be at different terms and interest rates.

Say you take out a loan for a new 2024 Ford F-150 Platinum with the following details, for example:

  • Car price: $64,915
  • Down payment: $5,000
  • Loan amount: $59,915
  • Loan term: 72 months
  • Credit: Fair (601–660 credit score)
  • Interest rate: 7.14%
  • Total paid over the life of the loan: $73,837.72

With those terms, you'd have a monthly loan payment of $1,025.52. If you were to make a larger down payment, such as $8,000, you could take out a smaller loan ($56,915), and your monthly payment would be $974.17. You'd pay less overall: $70,140.59 over the life of the loan.

In the News: Auto loan rates are related to the Federal Reserve's benchmark rate—if the Fed rate goes up, average auto loan rates usually will, as well. The Fedheld rates steady for an eighth consecutive timeat its July 31meeting. The federal funds rate is at its highest level since 2001, but Fed officials are projecting one or possibly two rate cuts before the end of the year.

Auto Loans: Pros and Cons


Pros

  • Provides access to a car: If you need a car to get to work or school and can't afford to buy one with cash, an auto loan can give you that access to the transportation you need.
  • Spreads out the expense of a vehicle purchase: Even if you have enough cash to buy a car, auto financing spreads out that expense, so you don’t deplete your savings all at once.
  • You'll own the car: Your lender technically owns the car while you pay down your loan, but once it's paid off, you'll own the car outright. New car leases can save you money with lower monthly payments, but there's no vehicle ownership.
  • Flexible loans: Auto loans can offer flexibility with loan amounts and repayment terms to help fit into your budget.
  • Can help build credit: Like other installment loans, auto loans can be used to build credit as you make on-time monthly payments.

Cons

  • Interest rates can be high: Auto loan rates are lower than what you can expect from a personal loan or credit card. But if your credit isn't in great shape, you can still end up with a high interest rate, which could make monthly payments unaffordable.
  • Vehicles depreciate: While you're paying down your loan, the value of your vehicle is depreciating. If the vehicle's value is less than what you owe on your loan, you may have to pay the difference when you sell the car or if the vehicle gets totaled in an accident.
  • Can damage your credit: If you miss a payment by 30 days or more, it could damage your credit score significantly.
  • Default can result in repossession: If you fail to make payments for a longer period, your lender could repossess the vehicle and sell it to recoup the remaining loan balance. If there's a deficiency after the sale, you may still be on the hook for that debt.

Where Are the Big Banks?

We included big banks like Chase, Capital One, Bank of America, and U.S. Bank in our review of the auto loan industry, but these financial institutions don't always make our "Best" lists.

Why? Although these banks are reliable and used by millions of people, they usually don't offer the very best rates and terms. Online banks and lender marketplaces tend to have lower operating costs, and can pass those savings on to borrowers. Big banks tend to score well in our rankings, but they don't usually come out on top when it comes to auto loan interest rates, flexibility in terms, and accessibility.

Frequently Asked Questions

  • Which Companies Are Best for Car Loans?

    Our top-rated lenders offer the lowest rates on new and used car loans in the auto financing industry—if you've got good credit and you want the best rates, take a look at PenFed, AUTOPAY, Consumers Credit Union, LendingTree, LendingClub, and OpenRoad Lending. You'll also find several good options for refinancing, as well.

  • How Do You Get the Best Car Loan Rate?

    Not everyone qualifies for the best auto loan rates. Here are some things you can do before and during the application process to tip the odds in your favor:

    • Check your rate with as many lenders as you can (within a short timeframe).
    • Pay down your existing debt, especially credit card debt.
    • Check your credit score and credit reports, and fix any errors before you apply for a loan.
    • Use your loan pre-approval offers to negotiate a lower rate with the dealership.
  • What Credit Score Do You Need to Qualify for a Car Loan?

    There is no overall minimum credit score you’ll need to qualify for an auto loan. It depends on the lender; each lender has its own credit requirements. In general, if you have good or excellent credit (670 or higher), you’ll qualify for the best auto loan rates. Lenders typically use an auto-loan specific credit scoring model (like a FICO score or VantageScore). See the best car loans for bad credit if you’re dealing with a lower score.

  • Where Can I Get an Auto Loan?

    You can obtain an auto loan through a dealer in a dealer-arranged financing agreement or directly from an online lender, credit union, or traditional bank. Some dealers also offer in-house financing for car buyers with bad credit.

  • When Is the Best Time to Buy a Car?

    Ultimately, the best time to buy a car is when you need one. But if you have some flexibility, experts recommend the following times:

    • The end of the month, quarter, or year: Car salespeople often have to meet quotas for each month, quarter, and year, so they may be motivated to make a deal toward the end of those periods to ensure they make the cut.
    • Three-day weekends: Dealerships often run sales events for President's Day, Memorial Day, Labor Day, and other three-day weekends. The same goes for other holidays, such as the Fourth of July and Black Friday.
    • The end of the model year: Dealers may offer deals to get rid of inventory and make way for the latest model. Research when new models are released for the car you want and see if it can help you with negotiations.
  • What Is a Good APR for an Auto Loan?

    According to a report by Experian in Nov. 2023, average rates for 2023 were 7.03% for new cars and 11.35% for used cars, although rates will have changed somewhat since then. If you get a rate lower than the average, you can generally feel like you're getting a good deal. Your rate will vary depending on your credit score, income, and other factors.

  • What Are Used Car Loan Interest Rates?

    By Nov. 2023, the average interest rate for used cars in 2023 was 11.35%, according to Experian. Here's the average used car loan interest rate for each credit score range:

    • Super prime: 7.43%
    • Prime: 9.33%
    • Near prime: 13.53%
    • Subprime: 18.39%
    • Deep subprime: 21.18%
  • Companies We Reviewed

    We researched and reviewed 21 companies to find the best seven lenders you see on the list above. While we write individual reviews for most companies, we do not always write reviews for companies we would not recommend. Below are the companies we researched along with links to individual company reviews to help you learn more before making a decision:

    Alliant Credit Union, AUTOPAY, Bank of America, Capital One, CarMax, Carvana, Chase Auto, Consumers Credit Union, Credible, First Tech FCU, LendingClub, LendingTree, LightStream, NASA FCU, Navy Federal Credit Union, OpenRoad Lending, PenFed, PNC Bank, U.S. Bank, USAA, Vroom.

Other Types of Auto Loans

  • Best Used Car Loans
  • Best Car Loans for Bad Credit
  • Best Auto Refinance Loans
  • Best Private Party Car Loans
  • Best Car Loans for First Time Buyers
  • Best Motorcycle Loans
  • Best RV Loans
  • Best Auto Repair Loans

Guide to Auto Loans

Learn more about auto loans:

  • How Auto Loans Work
  • How Credit Union Auto Loans Work
  • How to Get Pre-Approved for a Car Loan
  • How to Get a Car Loan
  • How to Buy a New Car
  • How to Refinance a Car Loan
  • How to Buy a Car With No Credit
  • Dealer Financing: What It Is, How It Works
  • How to Buy a Car From a Dealership
  • How Interest Rates Work on Car Loans
  • Credit Union vs. Bank for Auto Loan: What’s the Best Choice?
  • Personal Loans vs. Car Loans: What's the Difference?
  • Subprime Auto Loan: Meaning, Rates, FAQs
  • Car Title Loan: What It is, How It Works, Example
  • Auto Loan Payment and Interest Calculator
  • Auto Loan Review Methodology

How We Picked the Best Auto Loans

Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of auto loan lenders. To rate providers, we collected hundreds of data points for a period of over two months across more than 20 auto loan lenders, including interest rates, fees, loan amounts, borrower requirements, and vehicle requirements, to ensure that our reviews help users make informed decisions for their borrowing needs. We also conducted a survey of 1,016 auto loan borrowers for attitudes and opinions about lenders and the loan approval and disbursem*nt process.

Best Auto Loan Rates and Financing for August 2024 (8)

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.

Related Articles
Best Auto Refinance Loans for August 2024 Best RV Loans for August 2024 AUTOPAY Auto Loans Review 2024 Heading to the Car Dealership? Get a Great Deal by Following These 9 Steps Overwhelmed by Car Payments? You Can Get Debt Relief With These Strategies Best Used Car Websites for August 2024

Related Terms

What Is Comprehensive Insurance and What Does It Cover?

Comprehensive insurance is car insurance that covers damage to your car from causes other than a collision. Learn about comprehensive insurance costs.

more

Subrogation in Insurance: What it Is and Why It's Important

Subrogation is the right of an insurer to pursue the party that caused the loss to the insured in an attempt to recover funds paid in the claim.

more

Direct Consolidation Loan: Pros, Cons, and Process

A direct consolidation loan is a type of direct loan that combines two or more federal education loans into a single loan.

more

What Is a Payday Loan? How It Works, How to Get One, and Legality

A payday loan is a type of short-term borrowing where a lender will extend high-interest credit based on your income.

more

Cash Advance: Definition, Types, and Impact on Credit Score

A cash advance is a service provided by credit card issuers that allows cardholders to immediately withdraw a sum of cash, often at a high interest rate.

more

PLUS Loan: Meaning, Pros and Cons, Repaying

A PLUS loan is a federal loan for higher education, available to parents of undergraduates as well as to graduate and professional students.

more

Best Auto Loan Rates and Financing for August 2024 (2024)
Top Articles
داستان عاشقانه | 20 داستان کوتاه و طولانی با محتوای عاشقانه
Family grieves deaths of St. Louis cousins, 12 and 14, shot at birthday party downtown
Identifont Upload
Es.cvs.com/Otchs/Devoted
Fototour verlassener Fliegerhorst Schönwald [Lost Place Brandenburg]
Beds From Rent-A-Center
Irving Hac
Southland Goldendoodles
Remnant Graveyard Elf
Craigslist Labor Gigs Albuquerque
Bc Hyundai Tupelo Ms
Michaels W2 Online
Farmer's Almanac 2 Month Free Forecast
Where to Find Scavs in Customs in Escape from Tarkov
Account Suspended
Satisfactory: How to Make Efficient Factories (Tips, Tricks, & Strategies)
Rural King Credit Card Minimum Credit Score
Eine Band wie ein Baum
Robert Deshawn Swonger Net Worth
Nearest Walgreens Or Cvs Near Me
Icivics The Electoral Process Answer Key
Puss In Boots: The Last Wish Showtimes Near Cinépolis Vista
Panolian Batesville Ms Obituaries 2022
Shadbase Get Out Of Jail
Craigslist Maryland Trucks - By Owner
Macu Heloc Rate
BJ 이름 찾는다 꼭 도와줘라 | 짤방 | 일베저장소
Villano Antillano Desnuda
Combies Overlijden no. 02, Stempels: 2 teksten + 1 tag/label & Stansen: 3 tags/labels.
Mcclendon's Near Me
Orange Park Dog Racing Results
Rgb Bird Flop
Yayo - RimWorld Wiki
Rainfall Map Oklahoma
Free Tiktok Likes Compara Smm
Kamzz Llc
1475 Akron Way Forney Tx 75126
Rogold Extension
Acuity Eye Group - La Quinta Photos
Weekly Math Review Q4 3
The Bold And The Beautiful Recaps Soap Central
Case Funeral Home Obituaries
Frommer's Philadelphia & the Amish Country (2007) (Frommer's Complete) - PDF Free Download
Tryst Houston Tx
2023 Fantasy Football Draft Guide: Rankings, cheat sheets and analysis
Sams Gas Price Sanford Fl
Timothy Warren Cobb Obituary
Petfinder Quiz
Playboi Carti Heardle
The 13 best home gym equipment and machines of 2023
Craigslist Com Brooklyn
Besoldungstabellen | Niedersächsisches Landesamt für Bezüge und Versorgung (NLBV)
Latest Posts
Article information

Author: Arline Emard IV

Last Updated:

Views: 6486

Rating: 4.1 / 5 (52 voted)

Reviews: 91% of readers found this page helpful

Author information

Name: Arline Emard IV

Birthday: 1996-07-10

Address: 8912 Hintz Shore, West Louie, AZ 69363-0747

Phone: +13454700762376

Job: Administration Technician

Hobby: Paintball, Horseback riding, Cycling, Running, Macrame, Playing musical instruments, Soapmaking

Introduction: My name is Arline Emard IV, I am a cheerful, gorgeous, colorful, joyous, excited, super, inquisitive person who loves writing and wants to share my knowledge and understanding with you.