With the average price of a new car around $36,000, ($20,000 for used cars) you want the very best auto loan rate you can get. But sometimes comparing auto loan rates can be confusing. Different loan terms can change your monthly payment. Also, some lenders will tack on additional fees — especially if you have poor credit and a smaller pool of available options to choose from.
By looking at some of the best auto loan rates for both new purchases and refinancing, you can get a good idea of what you could and should be paying. What’s more, you can use the rates to figure out what a reasonable monthly loan payment would be for you, as well as how much you can afford to pay for a vehicle right now.
How Auto Loans Work
In the case of auto loans, your lender will distribute your money in a lump sum and then you will pay it back, plus interest, over time. The dollar amount, interest rate, and the time length of the loan will all affect your monthly repayment amount. All three of these factors need to be considered so that you can choose the criteria that works best for you.
- The loan amount will depend on where you buy your car and whether you’re borrowing the entire price of the car or if you have a trade-in vehicle and/or make a down payment at the time of purchase.
- The annual percentage rate (APR) is the interest rate you pay on your loan at the time of borrowing. However, over time, you can always look into refinancing options as rates change or if you find a better deal at another financial institution.
- The loan term is the amount of time you have to pay it back (typically 36-72 months). A longer loan term saves you money on your monthly payments, but that also means you’ll pay more for your car in total, over the life of the loan. This is where a trade-in vehicle or down payment can help save you money.
By looking at some of the best auto loan rates for both new purchases and refinancing, you can get a good idea of what you could and should be paying. What’s more, you can use the rates to figure out what a reasonable monthly loan payment would be for you, as well as how much you can afford to pay for a vehicle right now.
What are the Best Auto Loan Rates?
While auto loan rates were slightly lower at the beginning, current auto loan interest rates overall have increased slightly over the last couple of years for most types of auto loans. Having said that, if you have good to great credit, your rate will probably still be quite competitive. But rates are constantly changing, so it’s best to get the most up-to-date information you can. As of June 2022, U.S. News & World Report lists the following rates based on credit scores:
| Credit Score | New Car Loan | Used Car Loan | Refinance Car Loan |
|---|---|---|---|
| 750 or higher | 4.85% | 5.10% | 4.21% |
| 700-749 | 4.66% | 4.81% | 4.75% |
| 600-699 | 5.64% | 5.89% | 6.82% |
| 451-599 | 10.99% | 11.24% | 10.81% |
When comparing rates by the length of the loan, the rates are also slightly higher from the 2019 numbers:
- 60-month new car loan: 4.75% (up from 4.61% in 2019)
- 48-month used car loan: 5.5% (up from 4.57% in 2019)
- 36-month used car loan: 5.13% (this rate is relatively steady when compared to 2019)
These rates are available to those borrowers with great or excellent credit, which means scores above 750. Borrowers in the next tier, above 700, may get a rate closer to 4.66% for a new car, and those below 600 might pay closer to 10%-11%. People with poor credit might be looking at as much as 25% — if you can qualify.
Remember that lenders may be able to offer a lower APR depending on your needs. Shorter terms, a smaller financing amount, the ability to set up automatic payments, and other factors could drop your APR to around 4%, which could save you several hundred dollars over the life of the loan. Shopping around is the only way to see which lenders are offering the best rates on any given day.
Which Online Lenders Are Offering the Best Auto Loan Rates?
While auto loan rates are important, you also need to choose a trustworthy and efficient lender to work with in securing an auto loan. Here are a few highly rated lending options:
Auto Credit Express
This highly rated online lender is backed The company specializes in helping borrowers with poor credit, limited credit histories, or even past bankruptcies. Auto Credit Express matches you up with one of the lenders in their network. The APR can vary depending on which company is the best fit for your financial needs. You can apply online in just 3 minutes to find out if you are qualified and what typical rates would be.
- Rates: They vary depending on the lender; Auto Credit Express simply matches you up with one of their authorized licensed car dealer partners.
- Minimum Loan Amount: None.
- Requirements: You must be 18 years old, live in the U.S. or Canada, and make at least $1,500/month to qualify for credit scores under 625. You cannot have any auto loan repossessions within the last year (exceptions for bankruptcies but they do come with additional requirements).
- Vehicle Restrictions: None.
LightStream
This highly rated online lender is backed by SunTrust Bank. It offers new car rates as low as 3.49%. The company primarily works with borrowers who have good credit, and they fund loans quickly. In many cases, you can get results the day you apply. The funds are deposited into your account and you can act as a cash buyer with the dealer, which may give you some advantages in negotiating the price.
- Rates: As low as 3.49% when you auto-pay
- Minimum Loan Amount: $5,000.
- Requirements: You must have a credit score above 660.
- Vehicle Restrictions: None.
Capital One
If you’re looking for a big bank with name recognition, Capital One may be a good fit for you. They offer good rates for those with good credit and some high rates for those with poor credit, but they do extend loans to those with credit scores down to 500. Capital One is a good option when you want to get pre-qualified and finalize financing at the dealership.
- Rates: For those with excellent credit (781-850), as low as 3.99% for new car loans (4.62% for used cars). Rates can be as high as 13.97% for those with scores below 660
- Minimum Loan Amount: $4,000.
- Requirements: You must have a credit score above 500 and monthly income above $1.500.
- Vehicle Restrictions: 7 years or newer.
Other lenders worth exploring include: Wells Fargo, Bank of America, BBVA Compass, CarsDirect, and MyAutoLoan.
What’s the Process for Getting an Auto Loan?
After comparing the best auto loan rates, if you don’t have the money to purchase a car, you’ll need to get an auto loan. Pre-qualification is the first step in applying and doesn’t require the lender to pull your credit report; however, that step could cause your score to drop by a few points. You can usually do this online, and it only takes a few minutes.
Next, you’ll need to get pre-approved or approved for the loan you’re seeking. Pre-approval works best before you know the exact vehicle you want to buy. Final approval is completed when you are in the process of purchasing. It can be helpful to go to the dealership with pre-approval information, because it cuts down on the amount of negotiating you’ll have to do with the sales department.
Once your loan is approved, you can get a check quickly — often within one business day. Some traditional lenders may take a few days to secure the financing, so talk to your lender to know what to expect.
