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If you’re buying a car, you might need a loan to cover the cost. Getting the best interest rate is one way to save money on your car purchase.
Some lenders offer lower rates if you enroll in automatic payments (also called “autopay”). Compare auto loan offers from three to five lenders to get the best deal. You’re more likely to get a lower rate if you have a higher credit score.
| Brand name | Best for | Starting APR | Minimum credit score | Term |
|---|---|---|---|---|
Southeast Financial Credit Union | Short-term loans | 4.50% | Not disclosed | 12-84 months |
Carvana | Online buying | 6.85% | None | 36-72 months |
Chase | Dealership purchase | Not disclosed | Not disclosed | 12-84 months |
PenFed Credit Union | Car buying service | 5.24% | Not disclosed | 36-84 months |
PNC Bank | Private-party purchase | 6.84% | Not disclosed | 12-72 months |
Lightstream | Unsecured auto loans | 7.49% | Not disclosed | 36-84 months |
Capital One | Refinancing | Varies | Not disclosed | 36-72 months |
Our top auto loan recommendations
Southeast Financial Credit Union: Best for short-term loans
Pros:
- Short-term loans available.
- No model year restrictions.
- Easy to join.
Cons:
- Limited physical branches.
- Difficult to find credit requirements.
- Must be a member to join.
Southeast Financial Credit Union offers some of the lowest advertised rates and provides loans for as little as 12 months. Anyone can join this credit union by meeting the membership requirements or donating $5 to Autism Tennessee.
Features that make Southeast Financial Credit Union automobile loans attractive include no application fee and no prepayment penalty, discounts for recent grads and the skip-a-payment program that allows borrowers to skip up to two months of payments on qualifying loans.
Carvana: Best for online buying
Pros:
- No minimum credit score required.
- Entirely online experience.
- Offer valid for 30 days.
Cons:
- Must purchase the car through Carvana.
- No negotiation.
- Must pay shipping fees.
Carvana offers an entirely online process you can complete from the comfort of your home. Additionally, there’s no minimum credit score: Carvana allows you to finance as long as you meet their income requirements (and have no active bankruptcies).
Carvana loans involve a soft credit pull for prequalification, which means you don’t have to worry about the loan temporarily reducing your credit score. Though you can qualify for a Carvana loan with less-than-excellent credit, the rates for Carvana loans are high relative to some other lenders on our list.
Chase: Best for dealership purchases
Pros:
- Works with the dealer.
- Offers a car buying service.
- Offer valid for 30 days.
Cons:
- Difficult to get rate information from the website.
- No refinancing.
- Fees might vary based on the dealer.
If you’re buying from a dealer within their network, Chase makes it easy to purchase an auto loan. All information is shared with the dealer, and your offer is locked in for 30 days. You can also get prequalified with Chase, and the online application process simplifies your car purchase process.
Being an existing Chase customer makes the loan process easier, but if you’re considering Chase for help financing your dream ride, be sure to choose a dealership that’s in-network.
PenFed Credit Union: Best for car buying service
Pros:
- Car buying service with rate discount.
- Wide field of membership to join.
- Cash incentives from some dealers.
Cons:
- Must be a member.
- Not all eligibility requirements are clear.
PenFed, also known as Pentagon Federal Credit Union, is one of the largest credit unions in the U.S. It’s easy to join PenFed, and no military service is required. PenFed scores well with users on TrustPilot, and they offer loans for used as well as new cars.
Though you don’t have to go to an approved dealer to get a loan from PenFed (as you do with other lenders on this list), PenFed’s car buying service offers cash rebates, help finding a car and special discounted rates for members.
PNC Bank: Best for private-party purchase
Pros:
- Get a loan to buy a car from a private party.
- Autopay discount.
- Loan term flexibility.
Cons:
- Limited PNC Bank locations.
- Not all eligibility requirements are clear.
- Minimum loan amount can be high.
If you’re buying from a private party, PNC Bank offers a variety of loan terms that can make the process more flexible. Their auto loan product is called “Check Ready,” which means you can apply for a loan and get preapproval before you go to the dealer to shop for a car.
Other attractive benefits of a PNC auto loan include 12-month short-term financing, the ability to apply for your loan online, on your phone or at a branch and an autopay discount that could reduce your monthly payments.
Lightstream: Best for unsecured auto loans
Pros:
- Personal loan not secured by the car.
- Autopay discount.
- Same-day funding is available directly to your bank account.
Cons:
- Must have excellent credit and sign up for autopay to get the lowest rate of 7.49%.
- Relatively high starting APR.
- No prequalification (hard credit check to see your rates).
You don’t need collateral — even your car — to get a loan from Lightstream. If you have excellent credit, you may be able to receive funding directly into your account and use the money to buy a car. You might also be eligible for an autopay discount.
On the other hand, if you have less-than-stellar credit, you might find it difficult to get a loan with a lower interest rate or even a loan at all from Lightstream. Lightstream also doesn’t offer prequalification, like some other lenders on our list.
Capital One: Best for refinancing
Pros:
- Offers auto loan refinancing.
- Dealership partnerships.
- Can use a co-applicant.
Cons:
- Can’t refinance a current Capital One auto loan.
- No autopay discount.
- Must use dealer financing at partner dealerships.
Capital One works with partner dealerships to offer preapproved loans for new and used vehicles. The Capital One Auto Navigator site also lets you shop for vehicles online from dealers who work with Capital One, removing the possibility that you will find your dream vehicle with a dealer who isn’t in the network.
If you’re hoping to get a lower payment or reduce your auto loan rate, Capital One offers refinancing. You can also apply with a co-applicant to make qualifying for a bigger auto loan easier or get a better rate.
How we chose our picks for best auto loans
We compared auto lenders based on a variety of factors, including loan rates, loan terms, amounts available to borrowers, fees and other items that may benefit consumers.
Ultimately, we looked for auto loans that offer the lowest rates, as well as flexibility with their designated terms. We also considered different perks and benefits of using the lender, including their available auto loan products and other incentives, such as whether or not the lender offers autopay discounts and services.
Choosing the best auto loan lender: Where to begin
When deciding where to get the best auto loan, consider your needs and preferences. Look for a lender that offers the terms and payments you want, and consider whether you’re likely to qualify for the lowest advertised rate based on your credit score and other factors.
As you shop around for the best auto loan rates, compare the offers of three to five lenders. You may want to prioritize comparing lenders that offer prequalification without a hard credit inquiry.
How car loans work
When you get a car loan, the lender provides you with cash upfront. The dealer is paid, and you drive off with the car. However, you must make regular monthly payments until you pay off the amount you borrowed, plus interest. You can reduce the amount of your loan with a down payment.
In most cases, the loan is secured by the car you purchase. As a result, if you stop making payments, the lender can repossess your car and sell it to recuperate the money that was loaned to you.
Pros and cons of auto loans
Pros:
- Buy a car you cannot afford without loan assistance.
- Make manageable monthly payments (A loan spreads out the large expense of a car into smaller installments).
- You own the car once it’s paid off.
Cons:
- You have to pay interest on the loan, which increases the overall cost.
- Missed payments can damage your credit and result in the loss of the car.
- Because of depreciation, you might be upside down on your car — owing more on the car than what it’s worth — for a time.
Types of car loans
Different types of car loans come with various restrictions and requirements. Here are some common car loan types:
- New car loan: For a loan for a new car, you can usually get financing from banks, credit unions and dealerships. You might also be able to get loans from online lenders for a new car.
- Used car loan: Many banks and credit unions offer financing for used cars, and you can usually get financing through dealers, too. However, you might not be able to get a loan for a used car if it’s more than 10 years old or has high mileage.
- Private-party loan: This is a loan that you get when you buy a car from an individual rather than a car dealer or from a used car lot. You usually need to get a loan through a bank or credit union, although the seller might be willing to offer you a loan.
- Car loan refinancing: You can get a different loan with a longer term — and/or a lower APR — to save money or create breathing room in your budget. When you refinance your car loan, you get a different loan with new terms and you use your new loan to pay off your old car loan.
- Lease buyout: If you’ve been leasing your car, you might be able to buy it at the end of the lease term. However, instead of paying one big lump sum to buy the car, you can finance the purchase through a lease buyout, which allows you to keep making payments with interest.
Frequently asked questions (FAQs)
How will your credit score affect your car loan?
Generally, when you have a higher credit score, you qualify for a lower interest rate. As a result, your car loan will cost you less in the long run. When you have poor credit, you likely need to pay a higher interest rate to offset the lender's risk — this increases the overall cost.
Can you negotiate the APR on a car loan?
You can negotiate a lower APR by changing your term length to something shorter, by getting a co-applicant (if it’s allowed), or by offering a bigger down payment. In general, the best available rate is set by market conditions, and you usually need good credit to qualify for the best rates.
Is it better to get an auto loan from a bank or a car dealer?
Whether it’s better to get an auto loan from a bank or a car dealer depends on the incentives they offer and your situation. You might sometimes get a better deal from a bank or credit union if you have an account.
In other cases, going through the dealer might get you preferred financing and other incentives. Compare offers from both financial institutions and dealerships to choose the right option for you.
Can I sell my car with a loan?
Yes, you can sell your car even with a loan remaining on it. However, you generally need to get enough from the sale of the car to pay off your balance.
If you don’t get enough from the sale of your car to pay it off, you might need to use some of your own money to complete the transaction. The lender has the car title as long as there’s a loan, and you need to pay off the loan to transfer the car title.
AP Buyline’s content is created independently of The Associated Press newsroom. Our evaluations and opinions are not influenced by our advertising relationships, but we might earn commissions from our partners’ links in this content. Learn more about our policies and terms here.
