Where to Get the Best Auto Loan Rates
Consumer interest rates are rising, so it’s more important than ever to shop around for your auto loan. LendingTree did some legwork for you: We crunched more than 500,000 loan applications to find the four best auto loan providers, depending on your credit score. (If you don’t know your credit score, check it here.)
While you shop around, keep in mind there’s a difference between a preapproval and a pre-qualification. If you get a preapproval for a loan, that means the lender pulled your credit and the loan offer is firm. If you get a pre-qualification, the lender most likely did not pull your credit, but gave you a ballpark estimate on the amount, term and APR, which you can use to help determine your budget.
- Best auto loan rates for good and excellent credit (680+)
- Best auto loans rates for fair (620-679) & bad credit (300-600)
- Capital One Auto Finance
- The best place to finance (and buy) a used car completely online
- New auto loan rates vs. used auto loan rates
- How to get the lowest rate on your auto loan
For borrowers toward the top of the credit tier, LightStream was the most popular lender, giving the lowest average APR for new and used auto loans.
As a division of Atlanta-based SunTrust Banks, this online lender specializes in non-mortgage loans. So if you’re looking for a loan for anything from a wedding to a vehicle, LightStream might be able to help you.
Here are the starting APRs LightStream offers for auto loans:
- New car auto loans 3.99% *
- Used car auto loans (purchased from a dealer) 3.99% *
- Used car auto loans (purchased from a private seller) 4.99%*
* Rates quoted with autopay option.
For each of these, LightStream will loan a minimum of $5,000 and a maximum of $100,000 between 24 and 84 months. If you are approved, the maximum APR LightStream will charge you is 17.49%. If you choose not to enroll in autopay, your rate will go up 0.5%.
What we like: One of the first things you see on LightStream’s website is a large, easy-to-read chart with terms and APRs. If you shop around and find a better rate somewhere else, LightStream said it will beat any qualified rate by 0.10%. There are no restrictions based on vehicle age, mileage, make or model. Same-day funding is available, too, so you can get your car as soon as the paperwork goes through.
Where it may fall short: LightStream doesn’t offer preapprovals, which means you have to know the car you want before you apply. Its cutoff credit score is 660, and it heavily prefers borrowers with low debt to income.
Online experience: LightStream guarantees customers the best loan process or it’ll send you $100, though terms apply.
For borrowers with poor credit, Capital One Bank and SpringboardAuto emerged as favorites. Capital One was chosen most often, but the two-year-old SpringboardAuto offered the lowest average APR for used-car loan applicants.
Billion-dollar parent company Capital One offers full-service banking, credit cards and loans. Auto borrowers can get pre-qualified with the Capital One Auto Navigator program and, once you know exactly which car you’d like, you could officially apply for a loan with Capital One Auto Finance.
Terms range from 36 to 72 months; amounts range from $4,000 to $50,000. New car APRs start at 3.99%. Used car APRs start at 4.53%.
Availability: Auto loans are available in all 50 states, but vehicles can’t have more than 120,000 miles or be newer than 2006 or 2008, depending on the state.
What we like: Capital One has a strong brand name and competitive rates. You could get a pre-qualification that doesn’t ding your credit and is good for 30 days. Capital One’s auto loan calculator allows you to plug in different credit scores to see how it would affect your predicted APR and monthly payment.
Where it may fall short: While Capital One was the overall most popular choice, it didn’t offer the lowest average APR for used cars. It also doesn’t offer financing for cars bought from non-approved dealers or from private sellers.
Online experience: Website visitors may choose among four actions: Shop around for a vehicle, find a dealer that participates in its preapproval program so you can go shop in person, submit a preapproval application or try out the auto loan calculator.
Across the top three credit tiers (excellent, good and fair), Carvana was a top lender chosen by borrowers seeking used auto loans. Carvana isn’t just a place to obtain financing — you can find your next car here, too. Note that Carvana only finances its own cars.
With a name that plays off “nirvana,” Carvana offers a complete online experience for used car shopping and financing. It’s great for those who hate human interaction or just want the convenience of doing everything from a computer. It only offers used cars and used car loans, but works with all types of credit.
Loans are available in all 50 states with terms up to 72 months. Financing amounts vary depending on its inventory. For example, you could buy a car for as little as $7,600 or as high as $85,700 and finance it with Carvana.
What we like: Carvana gives a lot of information on its website. It has three auto loan calculators. Immediately after you click on a car from the inventory page, the site shows it to you next to a total price quote. You can then adjust possible APR, down payment, monthly payment and term rates to to see what your payments might look like.
Another one of Carvana’s calculators predicts what your APR will be based on where you live and your credit score. It also shows you the average APR in your state and compares the two, breaking down the costs into a monthly dollar amount and total over the life of the loan.
Where it may fall short: Other lenders have lower average APRs, and if you’re in a rural part of the country, it might be inconvenient to fetch your car. For those who live outside the radius of one of their centers, you’ll have to pay a shipping fee to have the car delivered to you, or you’ll have to figure out how to go get it and drive it back.
Online experience: The website is easy to use with high-definition photos, good search filters and intuitive organization.
Looking at the rates, you’ll see a trend: Used car auto loan APRs tend to be higher than new. This can be frustrating for car buyers as it can seem like you’re trapped between the choice of either paying big bucks in loan interest or bigger bucks for a new car’s depreciation.
Lenders don’t set the APRs just to mess with you. APR is largely based on lenders’ risk. Keep reading for some reasons behind the difference between APRs on new versus used car loans. Go here if you’re wondering whether to buy new or used.
If a lender has to repossess a vehicle and sell it at auction to recoup its losses, a newer car will most likely be worth more than an older one. Ergo, new cars are a safer bet and justify lower rates.
Manufacturers don’t have to make profit on loans
In order to entice customers to buy their new vehicles over competitors’, manufacturers often offer special deals, such as 0% APR. They are able to make little to no money on providing a loan because they’re making money on selling the car.
Competition from manufacturer loans
Lenders such as banks and credit unions typically can’t match manufacturer loan offers because they’re not making money from the sale of the vehicle. But they are pressured to better their own offers. Julie Olian, vice president of integrated communications at LightStream, said, “We tend to try and stay as low as possible to compete with them.”
Income and credit score
While it’s not always the case that people who buy used cars have lower incomes and lower credit scores than those who buy new, it’s true enough that used car loans are considered riskier. And higher risk means a higher APR.
Know your credit score. The higher your score, the more favorable the loan terms. The highest may qualify for manufacturer financing, which is generally the best deal for new cars. The lower your score, the more likely you are to qualify for market average rates.
Know your credit history. Not everything is based on score. If you have an OK score with a good history of paying on an installment loan, you’re likely to get a better auto loan APR than a person with a high score who’s only had one low-limit credit card to their name.
Shop around for the best auto loan. Don’t apply to one place, get one offer and decide that’s as good as it’s going to get. Your credit won’t be hurt by applying to multiple lenders any more than it will be by applying to one lender, as long as you do all applications within 14 days.
Get preapproved. Before going out and kicking some tires, know what your loan will cost you. Note that a pre-qualification is not the same as a preapproval.
- Pre-qualification doesn’t require a hard credit check. Because there isn’t a hard pull on your credit, the loan offer you might receive is not a firm offer, but something you can use to ballpark your budget.
- Preapproval requires a hard credit check and could result in a firm offer by the lender.
For more information, you can take a look at this article that explains why you should get a preapproved car loan before going car shopping. And when you do go shopping, know which documents to take with you so you won’t have to potentially make multiple trips.
Talk about the car and the car loan separately. Whether you’re talking with the sales person at the dealership or planning your budget while sitting at the kitchen table, don’t focus on monthly payments. Focus on the total price of the car and, separately, the total price of the loan, which is best represented by the APR. When you do discuss your loan with the dealer, show them your preapproval and ask them to beat the APR you already have.
We examined LendingTree auto loan data including more than 500,000 successful applications with 22 different auto lenders. We sorted them by credit score into two categories: new and used car purchases. We wanted to know: 1) which lenders consumers chose most often, and 2) who offered the lowest average APR.