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If you’re like most car buyers, you’ll need an auto loan to complete your car purchase. And if you already own a vehicle with a loan on it, there are multiple reasons why you may want to refinance it. In either case, you’ll need to know the best auto loan rates before you begin making an application.
The table below summarizes five lenders with the best auto loan rates, and what each specializes in. Detailed reviews of each lender will follow.
Best auto loan rates summary
| Lender | Minimum APR* | Minimum Credit Score | Loan Amount | Best for |
|---|---|---|---|---|
Varies by lender | 575 | $8,000-$100,000 | Fast funding | |
New: 4.50% Used: Varies by lender | Varies by lender | $4,000 up to $500,000 | Comparison shopping | |
PenFed | New: 5.19% Used: 6.04% | Not disclosed | Up to 125% up to $150,000 | Low rates |
USAA | New: 5.39% Used: 5.69% | Not disclosed | $5,000 up to $500,000 | Current and former members of the U.S. Military |
Alliant Credit Union | New: 6.00% Used: 6.62% | Not disclosed | Not disclosed | Older vehicles |
New: 7.49% Used: 7.49% | 660 | $5,000 up to $100,000 | Good or excellent credit | |
Ally Bank | Not disclosed | 600 | Up to $100,000 | Flexibility |
Varies by lender | Not disclosed** | Varies by lender | Refinancing |
*APR is variable, based on your borrower profile and will change over time. APRs are current as of June 26, 2023.
**RefiJet does not indicate a minimum credit score. They only report that you are eligible for a refinance if you are current on your existing auto loan and have made at least the last six months’ payments on time.
myAutoloan
myAutoloan
myAutoloan
myAutoloan is a website owned by Horizon Digital Finance, L.L.C. that started operations in 2003 that acts as a loan offer aggregator. That means they shop the internet for autoloans that fit your borrow profile. Their digital-first system enables them to provide you with the funds for your loan usually in 24 hours, and the technology is geared to help borrowers with less than excellent credit scores. They make car shopping easier because you can pre-qualify for a loan before you go to the dealership.
There are a few drawbacks to myAutoLoans, however; they don't operate in all 50 U.S. states, and they do have some vehicle restrictions that apply. And customer service isn't available on the weekends, which could be a hassle if you find your dream car on a Saturday and encounter any glitches when trying for pre-approval for your loan.
For most people, myAutoLoan is an easy, fast way to secure funding for a new or used car.
LendingTree
LendingTree Auto Loan Refi
LendingTree Auto Loan Refi
New: 4.50%
Used: Varies by lender
LendingTree is one of the most popular online loan marketplaces. If you need a loan, you can find multiple lenders on the platform for just about any type of loan. That includes home mortgages and home equity loans, credit cards, business loans, student loans and, of course, auto loans. LendingTree has participation from over 300 lenders, which includes many of the country’s biggest lenders.
After completing a simple online application, you can receive loan quotes from multiple lenders. Exactly how many you get will depend on the strength of your credit profile. The better your credit and income, the more offers you’re likely to get. You can then choose the best offer available and complete the application process.
It’s important to know that LendingTree is not a direct lender, so you will need to complete a formal loan application with any lender you select. LendingTree’s online application is designed only to solicit offers from lenders. Once you choose a loan, you’ll need to provide more detailed information to that specific lender.
It’s difficult to generalize info for auto loans (or any other type of loans) on LendingTree. Loan amounts, terms, interest rates and credit requirements vary across the dozens of lenders that offer financing. LendingTree empowers you to choose the best offer without submitting applications to multiple lenders.
PenFed
Penfed Auto Loan Refi
Penfed Auto Loan Refi
New: 5.19%
Used: 6.04%
Short for Pentagon Federal Credit Union, PenFed is the third-largest credit union in the country, with more than $35 billion in assets. And though it has branch offices in only 13 states, it provides financial products to consumers across America. That includes auto loans, in addition to mortgages, credit cards, personal loans, and checking and savings accounts. As is typical of credit unions, you’ll need to become a PenFed credit union member – by opening a checking account – to be eligible for an auto loan.
PenFed makes car loans available for both the purchase and refinance of new and used vehicles. But if you purchase your vehicle through PenFed’s New Car Buying Service the minimum APR will be 4.49%. If you purchase through its Used Car Buying Service, the minimum APR is 5.74%.
The loan application process takes place completely online and can be completed in a matter of minutes. Once your loan is in place, PenFed can also provide gap insurance, as well as a vehicle protection plan and a debt protection plan, in case you’re unable to make your monthly payments on time. The credit union makes loans available only on vehicles with fewer than 125,000 miles.
USAA
USAA Auto Loan Refi
USAA Auto Loan Refi
New: 5.39%
Used: 5.69%
USAA has grown into a diversified financial services company offering their products to current and previous members of the U.S. military and their families.
One of those products is auto loans, and USAA is one of the leading providers in the country. The entire auto loan application process takes place online. Financing is available for new cars, used cars, refinancing, and lease buyouts.
And not coincidentally, USAA also rates as one of the top auto insurance companies. That means you can add an outstanding auto insurance policy to your new car purchase and loan.
The main disadvantage of USAA is that they are not available to the general public, only to consumers with a military connection. Another disadvantage is on older used cars. USAA currently charges a minimum APR of 8.74% on vehicle models from 2015 or older. (The maximum term of such vehicles is also limited to not more than 72 months.)
Alliant Credit Union
Alliant Auto Loan Refi
Alliant Auto Loan Refi
New: 6.00%
Used: 6.62%
Alliant Credit Union is a nationwide auto lender, allowing you to complete your application online or by phone. Whether you are applying directly for a loan or for pre-approval, the process can typically be completed on the same day. Like PenFed, you must become a member of the credit union to be eligible for auto financing. Though it’s based in Illinois, the credit union provides auto loans in all 50 states.
One major advantage Alliant Credit Union offers is that they will make loans on used cars up to 15 years old. Many lenders won’t finance a vehicle that’s over 10 or 12 years old. And like other lenders on this list, Alliant does offer a debt protection plan in cases of death, disability, or involuntary job loss.
Alliant has its own car buying service that allows you to save 0.50% on your auto loan APR. They also offer their Alliant Vehicle Service Plan, which they claim will save you an average of 25% on maintenance and repairs of your vehicle at thousands of certified mechanics nationwide.
LightStream
LightStream Auto Loan Refi
LightStream Auto Loan Refi
New: 7.49%
Used: 7.49%
If LendingTree is a general loan platform where you can receive nearly any type of loan, LightStream is the opposite. Essentially, they offer a single loan type — a personal loan — for each loan category, including auto loans. However, interest rates and loan terms will vary based on the purpose of the loan, which means they may be more restrictive with some loan types than others.
For auto loans, loan rates vary from 7.49% for the best credit profiles to a maximum of 15.69% APR. The same rate structure applies whether the vehicle you are purchasing is new or used. Like other lenders on this list, LightStream does not require you to make a down payment on the vehicle you are purchasing.
One factor to be aware of if you want to apply with LightStream is that they require good or excellent credit. While a minimum credit score 660 is indicated, LightStream looks at more than the borrower’s credit score. They require several years of credit history from a variety of accounts, such as major credit cards, installment loans and previous vehicle loans. There must be no indication of distress in managing your payment history.
You must also demonstrate your ability to save money, which is shown by savings and retirement account balances. Finally, LightStream looks closely at your debt-to-income ratio (DTI). This gives lenders a sense of your ability to repay a loan and to stay on top of the monthly payments. You need a stable income source and be able to demonstrate that you successfully manage any current obligations, as well as the new loan you are applying for.
Ally Bank
Ally Auto Loan Refi
Ally Auto Loan Refi
Ally is probably best known today for its investment arm, Ally Invest, and for having one of the best high-yield savings accounts in the industry. But as the successor organization to General Motors Acceptance Corporation (GMAC), Ally Bank is also one of the leading auto lenders in the country. Ally provides vehicle maintenance plans, gap coverage, and lease protection plans.
Ally Bank may be the most flexible auto lender in the country. That’s because they offer both purchase financing and vehicle leasing. They even provide specialty vehicle financing to help cover accessibility needs, such as wheelchair lifts or right-hand drive capability. They offer multiple payment options including paying online, by text, bank bill pay, phone, mail, in-person, and with debit card payments.
One disadvantage with Ally Bank car loans is that you can’t apply for a loan or check rates online. Ally works with thousands of car dealerships around the country, so you’ll need to get loan quotes through a dealership. The advantage of this arrangement is that you may be eligible for preferential loan rates available only through dealers.
RefiJet
RefiJet Auto Loan Refi
RefiJet Auto Loan Refi
RefiJet is an online marketplace for auto loan refinancing. It provides an opportunity for consumers to be matched with a participating lender offering the best rate and terms for a vehicle refinance. Unlike other lenders, RefiJet offers only auto loan refinances, and not loans for vehicle purchases.
Because it is an online marketplace, rates, terms, loan amounts, loan-to-value limits, and vehicle types are determined by the individual lender you will be working with. But the platform has an A+ rating with the Better Business Bureau, so the lenders must be delivering the type of customer service consumers expect.
NOTE: While RefiJet is a free site to make applications on, they do report charging a processing fee upon loan completion. They don’t disclose the amount of this fee, but various sources on the web report it to be alternatively $395 or $495.
To be eligible for refinancing, a vehicle must be no more than 10 years old and have less than 150,000 miles on it. No minimum credit scores are indicated, but the minimum required credit standard is that your current loan will be paid up-to-date, with a minimum of the last six months’ payments being made on time. Naturally, the higher your credit score, the lower your interest rate will be.
Specific services, like gap coverage and vehicle servicing plans, will depend on the lender you ultimately select for your refinance.
Auto loans pros and cons
Pros:
- Auto loans enable consumers to purchase vehicles without the need to pay the entire purchase price upfront.
- Auto loans typically have lower interest rates than credit cards or personal loans, since they are secured by the vehicle being financed.
- For the same reason, it can be easier to qualify for an auto loan than a personal loan or a credit card.
- Once the loan is paid in full, the vehicle is 100% yours.
Cons:
- Most auto lenders limit the age and mileage on vehicles eligible for financing.
- Many lenders will finance more than the value of the vehicle – up to 125% – but that will leave you with negative equity in your car.
- Interest rates and payments are high for consumers with fair or poor credit.
- Since an auto loan is secured, the vehicle can be repossessed if you fail to make the payments.
Types of Auto Loans
There are six primary types of auto loans.
New car loans
These are loans taken specifically for the purchase of a brand-new vehicle. They are available through dealerships, as well as financial institutions.
Used car loans
These loans work like new car loans, except they are designed specifically for the purchase of used cars. They are available from the same sources where you can get new car loans. You can generally expect slightly higher interest rates and more restrictive lending terms for used car loans.
Refinances
This is any type of loan used to replace existing financing on a vehicle. That can include replacing loans on new or used cars.
Lease buyout
When you lease a vehicle, the leasing company may offer you a price to buy the vehicle outright. Though it will be less than the original value of the vehicle at the time you leased it, you may need financing to cover the cost. A lease buyout enables you to convert a car lease into an outright purchase.
Bad credit auto loans
This encompasses nearly any type of auto loan that is not available from traditional financial institutions, like banks and credit unions. They are sometimes referred to as subprime auto loans and carry a higher interest rate and more restrictive terms.
Commercial and business auto loans
These can encompass all of the above, except they are designed specifically for vehicles used for business or commercial purposes. For that reason, they carry different financing terms, loan amounts, and pricing.
How to get the best auto loan for you
Start by getting a copy of your most recent credit report, as well as your credit scores from all three major credit bureaus. (You can obtain your credit scores free of charge from the website AnnualCreditReport.com.) Most lenders will be looking for a minimum credit score in the 650 to 680 range, but you’ll get a lower rate with a higher score.
Review your credit report and look for any errors, like incorrect late payments or past due balances. Clear up these errors to increase your credit score before applying for loans.
Next to improving your credit, the most important strategy is to shop between lenders. You should get quotes from at least three or four to be certain you’re getting the best rate. But you may be able to lower the rate even more by making a larger down payment and/or taking a shorter loan term.
If you have bad credit, or insufficient credit to qualify for a standard car loan, you may get a better deal by adding a qualified cosigner to your loan. You may also want to consider making a large down payment on the vehicle to encourage a lender to provide the financing.
How to apply for an auto loan
The process of applying for an auto loan is very similar to preparing yourself to get the best loan. Once again, start by getting a copy of your credit report and credit scores. Knowing what these are in advance will help you to be better prepared for the application.
Next, get your documents together. That will include, first and foremost, income-related documentation. You’ll need to be ready to supply the name, address, and contact information for your employer, as well as copies of recent pay stubs and W-2s. The lender will use this information to verify your employment and income for qualification purposes.
Other documentation will include documents related to your current vehicle, if it is to be sold as part of the new purchase. The lender will also need information on the new vehicle. That will include the year, make, and model, as well as any mileage on the vehicle. You’ll also need to supply the purchase price and the amount of financing you want to apply for.
If you are making a cash down payment on the new car, the lender may request evidence of the source of funds, such as a bank account. Finally, you should expect to provide a copy of your driver’s license, as well as proof of residence, for identification purposes.
You can make an application in-person, online, or in some cases, by phone.
TIP: Get a preapproval from a lender before shopping for a vehicle. That will not only show that you are a qualified buyer but also that you already have the financing lined up. That can put you in a stronger bargaining position during the purchase negotiations.
Auto loan alternatives
What are your options if you don’t qualify for an auto loan from a bank, credit union, or dealership?
Some of the possibilities include the following.
Private party financing
This includes loans from individuals, which can be the vehicle seller. However, these loans are rare and often come with high rates and stiff terms. Relying on them will greatly restrict your car-buying choices.
Family financing
A family member provides a private loan for you to purchase a vehicle.
Paying cash
This will completely eliminate the need for financing, but it will also limit the vehicle you can purchase to the amount of cash you have available.
401(k) loan
Many employers permit 401k loans through their company-sponsored retirement plans. Under IRS rules, you can borrow 50% of the vested balance in your plan, up to $50,000, with a five-year repayment term. If this option is available to you, you won’t need to credit qualify for the loan, nor will it involve making an additional payment.
Home equity loans and lines of credit
If you have sufficient home equity, this can be one of the least expensive ways to finance the purchase of a car.
Personal loans
These are unsecured term loans that can be used for just about any purpose, including the purchase of a vehicle. They are commonly available in small amounts from banks and credit unions. But you can borrow up to $50,000 through dedicated personal loan lenders, like
Upstart, Upgrade, and Discover Personal Loans. If you have good or excellent credit, the rates on these loans will be only slightly higher than for auto loans themselves.
Methodology
To assemble this list of the best auto loan rates, we’ve relied on the following factors:
- Maximum loan amounts.
- Minimum credit scores.
- Lowest APRs available.
- Loan term ranges.
- Lender reputation, based on the rating by the Better Business Bureau.
- What each lender is best for.
- Where available, the loan-to-value ratio the lenders offer.
We also considered other factors, including the type of vehicles financed, vehicle mileage, and related services offered by each lender.
FAQ
What is an auto loan?
An auto loan is any type of financing secured by a motor vehicle. That can include a car, sport-utility vehicle, van or light truck. Auto loans are usually set up with a fixed rate and monthly payment, and a specific term which can be between 24 and 84 months.
Can you get a 0% interest rate on a car?
0% interest rates, when available, are usually offered through car dealerships. The dealership may offer 0% rates on select vehicles as a way of promoting sales.
Large dealerships, in particular, often send enough customers to lenders that they can work a special financing arrangement. But the dealership may also subsidize the interest rate to bring it down to 0%. When this happens, the dealer may also be charging a higher price for the vehicles to cover the cost of the interest rate buydown.
Can I refinance my car loan?
It’s usually possible to refinance a car loan but be aware that lenders do place restrictions on these loans. For example, a lender will typically limit both the age and mileage on any vehicle they’ll consider refinancing. They may also limit the type of vehicle, such as specialty vehicles or those that have been substantially customized.
What is a good interest rate on a 72-month car loan?
The best rates on auto loans are with those with the shortest terms, especially 36 and 48 months. At 72 months, rates are higher than the best rates on shorter-term loans. In the current interest rate environment, a good rate will be in the 6% to 7% range on a new car, and between 7% and 8% for a used vehicle.
Can I get an auto loan with bad credit?
Yes, but be prepared to have a higher interest rate and monthly payment. Auto loan interest rates are largely determined by credit scores. The highest credit score ranges can get you an APR that will be in line with those shown in this article. But lower credit scores come with higher rates, sometimes much higher.
For example, if you have a credit score below 600, be prepared for an interest rate of 12% or higher. You should also expect to make a larger down payment, perhaps as much as 20%. Subprime auto lenders may also limit the amount of money you can borrow to purchase or refinance a vehicle.
This story was written by NJ Personal Finance, a partner of NJ.com. The information presented here is created independently from the NJ.com editorial staff, and purchases made through links in this article may result in NJ.com earning a commission.
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