Written by Jenn Jones | Edited by Katie Lowery | Updated March 31, 2023
Read more about how we chose the best auto loans.
*May include rate discount from using autopay or a car-buying service
Getting a car can feel a lot like going to a circus — for the main act, a car appears in your driveway and money disappears from your wallet.
With an auto loan, you agree to repay a lender over a set term, typically three to six years, in exchange for them paying a dealership (or a private seller) so that you can get a car. You generally pay more than what you borrowed, which equates to profit for the lender. How much more you pay largely depends on your credit score.
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With a higher credit score, less of your paycheck will do a vanishing act. Since the lowest APRs (annual percentage rates) are offered to the borrowers with the highest credit scores, improving your credit score before applying for an auto loan can really be worth the effort.
The difference between the highest and lowest used-car APR in Q2 2022 was nearly 17 percentage points, according to Experian. On a 5-year loan for $25,000, for example, you could save nearly $12,700 over the life of the loan if you applied with a higher credit score.
If you have no credit history or you’ve made some credit mistakes along the way, it’s still possible to get car loans for bad credit. If you’d like to improve your chances of being approved or possibly secure a lower rate, consider adding a cosigner, making a large down payment or both. No matter your score, it’s important to shop around for your auto loan and compare multiple offers.
| Average auto loan rates by credit score | ||
| Credit score | New car avg. APR | Used car avg. APR |
| 781-850 | 2.96% | 3.68% |
| 661-780 | 4.03% | 5.53% |
| 601-660 | 6.57% | 10.33% |
| 501-600 | 9.75% | 16.85% |
| 300-500 | 12.84% | 20.43% |
Source: Experian State of the Automotive Finance Market report, Q2 2022
Southeast Financial Credit Union offers the lowest auto loan starting rate that we found from a lender with a national reach and open membership. SFCU’s starting APR (3.00% to 6.00%) is dependent upon loan term. For example, to qualify for SFCU’s starting 3.00% rate, you’ll need a 12-month term and credit scores above 750. This lender also offers financing for motorcycles and powersport vehicles.
WHAT WE LIKE
The credit union only requires a $5 minimum donation to Autism Tennessee to qualify for membership.
WHERE IT MAY FALL SHORT
Southeast Financial is a smaller credit union without many brick-and-mortar locations for in-person transactions. It also doesn’t refinance its own loans.
Navy Federal Credit Union’s advertised auto loan APR could go even lower. Active duty, senior enlisted (E-7 through E-9) receive a 1% APR discount, while all active-duty and retired military members qualify for a 0.25 percentage-point discount.
WHAT WE LIKE
Besides low rates, Navy Federal’s prices for auto loan add-ons, such as GAP insurance, are also low. Read our full Navy Federal Credit Union review.
WHERE IT MAY FALL SHORT
Navy Federal doesn’t publish a minimum credit score requirement or a range of loan amounts. It also has strict eligibility requirements. You must have ties to the U.S. military to join.
PenFed’s auto loan rate is pretty attractive, but this lender also offers a car-buying service to its members. PenFed’s online application process is simple and quick, but you’ll need to be a member to be approved for a loan.
WHAT WE LIKE
Membership requirements for the credit union are lax and you can request to join even if you have no ties to the military. Read our full PenFed Credit Union review.
WHERE IT MAY FALL SHORT
Longer loan terms come with higher starting APRs, so expect to pay a little more if you want a longer loan.
To become a member of Consumers Credit Union, you only need to make a one-time payment of $5 to the Consumers Cooperative Association. You do not need to live in a specific geographic area or work for a certain employer.
WHAT WE LIKE
Consumers Credit Union has a low starting rate, national reach and open membership. Plus, if you make automatic payments, you can receive a 0.25% rate reduction. Read our full Consumers Credit Union review.
WHERE IT MAY FALL SHORT
Like most credit unions, Consumers doesn’t feature as many customer-support options that you can find at large banks, such as 24/7 phone support.
| Bank of America loan details | |
| APR | From 5.79% |
| Min. credit score | Unspecified |
| Loan term | up to 72 months |
| Loan amount | From $7,500 ($8,000 in Minnesota) |
Bank of America offers convenience. It does not require borrowers to qualify for membership and it could be your one-stop financial shop. It has competitive auto loan rates for any type of auto loan you’d like: new, used, refinance, lease buyout and private party. And, if you are a Preferred Rewards member, you could qualify for an interest rate discount up to 0.50 percentage points.
WHAT WE LIKE
Bank of America has a variety of auto loans that you don’t always see from a single lender; it has no membership requirements and is the second-largest U.S. bank by assets. Read our full Bank of America review.
WHERE IT MAY FALL SHORT
Bank of America’s minimum loan amount is relatively high at $7,500; you could easily find a used car from a private seller for less.
| LendingArts loan details | |
| APR | From 5.44% |
| Min. credit score | Unspecified |
| Loan term | Up to 60 months |
| Loan amount | Unspecified |
LendingArts had one of the lowest average auto loan rates for drivers who refinanced on the LendingTree platform in the first half of 2022. The company does a soft credit pull to show you potential refinance offers from lenders and, once you choose an offer, that lender will do a hard credit pull to produce an official offer for your approval.
WHAT WE LIKE
LendingArts also offers purchase and refinancing loans for RVs and powersport vehicles.
WHERE IT MAY FALL SHORT
If you have a specific refinance lender in mind, such as a local credit union, apply to them directly, as LendingArts doesn’t publicize a list of its lender partners. LendingArts also isn’t very transparent about loan details, including loan amounts offered or credit score required.
| Capital One loan details | |
| APR | From 5.79% |
| Min. credit score | Unspecified; minimum monthly income required is $1,500 |
| Loan term | 36–72 months |
| Loan amount | From $4,000 |
On the LendingTree marketplace, Capital One emerged as a favorite, offering competitive rates on both ends of the credit spectrum, to both prime and subprime borrowers.
WHAT WE LIKE
Its Auto Navigator feature can give a ballpark estimate of your auto loan without needing a hard credit pull. If you want a more solid idea of your car loan before you go to the dealer, consider getting a car loan preapproval. Read our full Capital One review.
WHERE IT MAY FALL SHORT
Capital One auto financing might not be available at the dealership you want. It only offers car loans for vehicles purchased through its network of over 12,000 dealerships.
| LightStream loan details | |
| APR | From 6.99%* with autopay and excellent credit |
| Min. credit score | Unspecified |
| Loan term | 24–84 months* |
| Loan amount | $5,000–$100,000 |
*Payment example: Monthly payments for a $10,000 loan at 5.99% APR with a term of 3 years would result in 36 monthly payments of $304.17.
The online lender LightStream offers no restrictions based on vehicle age, mileage, make or model, and the starting rate for new and used car loans are the same because these loans are unsecured. While most people shy away from unsecured car loans, thinking the APR will be high, LightStream offered one of the lowest average rates for prime and midprime credit scores on the LendingTree platform in the first half of 2022.
WHAT WE LIKE
LightStream offers competitive rates and few restrictions. Read our full LightStream review.
WHERE IT MAY FALL SHORT
LightStream heavily prefers borrowers with good to excellent credit scores and low debt-to-income (DTI).
Like a car dealership but completely online, Carvana helps consumers find the auto loans they want to purchase Carvana vehicles.
WHAT WE LIKE
A no-haggle, online experience could take some of the stress out of car buying. Read our full Carvana review. Although Carvana doesn’t specify a minimum credit score requirement, it does work with bad-credit borrowers. You may qualify for Carvana financing as long as you’re 18 years or older (19 or older in Georgia), make at least $4,000 per year and have no active bankruptcies.
WHERE IT MAY FALL SHORT
You cannot use a loan offer you got through Carvana to purchase a vehicle from any other seller.
Apply to a couple of our best auto lenders or your own bank, credit union or online lender directly — without a middleman — and then ask the dealer to beat your preapproved rate.
Yes, you can negotiate APR. Ask the dealer to beat the auto loan preapproval rate you got directly from a lender. Putting more money down or getting a cosigner could also help reduce the APR on your loan.
The average APR for an auto loan in H1 2022 was 9.33%, ranging from less than 4% for those with credit scores over 720, to an average over 15% for borrowers with scores lower than 560. Credit unions tend to offer some of the lowest starting rates.
Here’s a complete guide on how to get a car loan. You generally want to start by checking your credit score, determining your budget and getting preapproved.
Automakers, credit unions, banks and online lenders could all potentially provide a low rate. You’ll never know what you qualify for until you apply. Applying to multiple lenders within a two-week window will not hurt your credit score any more than applying to one lender. Any drop to your credit score will be slight and temporary.
