The best auto loan rates are those that work for your financial situation. These include rates with low APRs, fees that are reasonable and repayment terms that make sense.
There are many methods to get the Best Auto Loan Rates, but some of our favorites are myAutoloan, PenFed Credit Union, Consumers Credit Union and iLending. They offer good rates, accept applicants with a wide range of credit scores and have competitive applications.
1. Shop Around
One of the best ways to ensure you get the lowest auto loan rates is to shop around. Whether you apply for financing at a bank, credit union or online lender, make sure you compare multiple quotes to find the best deal. Many lenders also offer prequalification applications, which can help you determine how much you can afford to borrow and give you an idea of your interest rate before you begin the car-buying process.
When comparing auto loan offers, consider a few key factors, including the car loan’s interest rate, the term length and any fees or charges. The length of the loan can impact your monthly payments and how much you pay in total, while additional fees can add up over time. Also, don’t forget to check whether the lender offers discounts for certain actions, such as signing up for automatic payments.
You can use an online calculator to see how different variables affect your car-buying budget. This will help you narrow your search and select the vehicle that’s right for you. Then, you can go shopping at dealerships and look at vehicles with confidence knowing you’re prepared for the buying process.
As a bonus, you may even save on the overall cost of the vehicle when you shop around for the best auto loan rates. Prospective car buyers with higher credit scores save more money than those with lower scores, according to an Experian study. On a new car purchase, someone with a near-prime credit score could save $5,491 by choosing the lowest APR instead of the highest.
For example, myAutoloan is an online marketplace that lets users input personal information and instantly receive competing car loan offers from lenders. The site’s free prequalification process can be used to narrow your search and gives you a sense of how low an interest rate you might qualify for before you apply. It also lists the average interest rate for borrowers with various credit scores, so you can quickly and easily compare offers. Its partner lenders also offer a range of flexible loan terms, from 36 to 72 months, and myAutoloan provides a clear breakdown of those options so you can choose the best fit for your situation.
2. Improve Your Credit Score
If you want the best auto loan rates, you need to improve your credit score before applying. A stronger score can help you get better interest terms on a car purchase, as well as lower your debt-to-income ratio and overall monthly payments.
In addition to your credit score, the lender you choose and the term of the loan also impact your auto financing rate. Taking the time to shop around and compare auto loan rates can help you find workable terms that fit your budget. Many online lenders offer prequalification tools to make it easier to determine your eligibility and view potential rates before you apply.
Some lenders will perform a hard inquiry on your credit when you request an auto loan quote, which can temporarily reduce your credit score. However, most credit scoring models consider inquiries made within a short window to be one inquiry, which can lessen the impact on your score.
Before you shop for an auto loan, pay down any existing credit card debt and avoid submitting applications for new lines of credit until you’re ready to buy a vehicle. Credit inquiries can drop your score by a few points, but they’re only a small part of the overall picture, and you can always wait a few weeks to submit more than one application for an auto loan.
A larger down payment can also help you get better auto loan rates. Lenders generally view this as lower risk for the borrower and can help you avoid a high loan-to-value (LTV) ratio, which typically increases your APR.
The best auto loan rates depend on a variety of factors, with your credit score having the biggest influence. You should aim to have a strong credit score and a stable source of income before applying for a car loan.
To improve your credit before you apply, you can use a credit monitoring service to track your progress and identify errors that could hurt your score. You can also reduce your debt load by paying down your credit cards and making timely payments on any other loans or mortgages you have.
3. Make a Larger Down Payment
Getting the best auto loan rates often requires more than simply finding the lowest interest rate. Borrowers should consider other factors such as fees, the maximum loan amount, and the repayment terms when comparing offers. Online marketplaces that allow you to compare loans and their terms from a variety of lenders can help borrowers find the right financing solution for their individual needs.
Another way to potentially get the best auto loan rates is by making a larger down payment. This reduces the loan-to-value ratio, which in turn can help reduce the interest rate. In addition, it’s worth noting that purchasing a used vehicle instead of a new one can also save you money in terms of both the initial purchase price and ongoing monthly expenses.
When comparing quotes, it’s important to understand the difference between interest rates and annual percentage rates (APRs). While both are expressed as a percentage, they aren’t exactly the same thing. Also, you should be aware that some lenders will offer prequalification quotes for prospective borrowers that aren’t final until the borrower applies and is approved.
In order to get the best auto loan rates, borrowers should strive to meet all of their obligations on time and work towards improving their credit score. This isn’t always easy, but it’s the best path towards getting lower interest rates in the future.
It’s also worth noting that some lenders may have minimum income requirements for borrowers to qualify for their best auto loan rates. If you don’t meet these requirements, you may be required to pay a higher interest rate to compensate for the additional risk that you pose to the lender.
It’s also important to make a large down payment, as this can significantly reduce the total cost of the loan. However, it’s important to weigh this against your budget and the ability to cover ongoing expenses, as the largest down payments typically require a substantial commitment upfront. If you’re having trouble affording a down payment, it may be worthwhile to explore other financing options like personal loans. These loans are designed to bridge the gap between a down payment and the purchase price of a vehicle, and can be applied to both new and used vehicles.
If you took out an auto loan at a high interest rate, it may be worth refinancing to get lower rates. As with car purchase loans, auto refinance rates depend on a variety of factors, but your credit score is probably the most important factor. If you’ve been able to improve your score since taking out your original auto loan, refinancing could save you thousands of dollars over the life of the loan.
The best place to shop for refinance auto loans is at a bank or credit union you already have an account with, as they’re likely to offer low interest rates on car financing. However, if you can’t find the best rates at your current institution, there are online marketplaces that connect you with lenders offering competitive rates. These sites allow you to submit a short application to receive multiple auto refinance rates without impacting your credit score.
There are also a few specialty lenders that specialize in providing auto refinance to borrowers with less-than-perfect credit. PenFed is one such lender with an excellent reputation for customer service and some of the lowest auto loan rates around. It’s rated A+ by the Better Business Bureau and has a stellar 4.6 out of 5.0-star rating on Trustpilot from over 1,200 reviews.
Another option is iLending, which has a relatively low minimum credit score requirement and works with a large network of lenders to provide auto refinance for subprime borrowers. Its customers have reported a high rate of satisfaction with its auto refinance options and, through consistent on-time payments on their refinanced loans, have been able to improve their credit scores over time.
You can use an online debt repayment calculator to determine whether lowering your monthly payment by refinancing your existing auto loan will make sense for you financially. If it does, take the time to research new lenders and loan offers before filing a refinance application. You’ll want to be sure that any new loan will fit your budget and you’ve carefully considered whether any fees associated with the refinance will offset any savings you’ll realize.
Finding the best auto loan rates for used cars requires careful research and consideration. By following these tips, you can increase your chances of securing favorable loan terms and saving money on your used car purchase:
- Research lenders: Explore various lenders, including banks, credit unions, and online lenders, to find those that specialize in used car financing or offer competitive rates for used cars.
- Check your credit score: Review your credit score and address any inaccuracies or areas for improvement. A higher credit score can help you qualify for better interest rates.
- Determine your budget: Set a budget and determine the loan amount you can afford based on your financial situation. Consider factors such as the car’s price, insurance costs, maintenance, and other related expenses.
- Get pre-approved: Obtain pre-approval from one or more lenders. Pre-approval provides you with a clear understanding of your budget and loan terms, giving you confidence and negotiation power when shopping for a used car.
- Compare rates and terms: Evaluate offers from different lenders, considering the interest rates, loan terms, fees, and any incentives or special programs for used car financing. Pay attention to the total cost of the loan over the repayment period.
- Consider the car’s age and mileage: Understand that the age and mileage of a used car can impact loan rates. Older cars or those with high mileage may have slightly higher interest rates due to increased risk. Consider these factors when selecting a used car and negotiating loan terms.
- Negotiate with lenders: Use pre-approval offers and competitive rates from other lenders as leverage to negotiate with the dealership or lender. Be prepared to ask for better rates or terms based on your creditworthiness and research.
- Read and understand the loan agreement: Before signing any loan documents, carefully review and understand the terms and conditions. Pay attention to the interest rate, loan duration, fees, and any potential penalties.
Remember to prioritize affordability and choose a loan that fits your budget. Carefully evaluate the loan terms, consider the overall cost, and seek advice from a financial advisor or loan specialist when necessary.
Frequently Asked Questions (FAQs):
- Can I get an auto loan for a very old or high-mileage used car?
Yes, it is possible to get an auto loan for an older or high-mileage used car. However, keep in mind that these factors can affect the interest rates and loan terms offered by lenders. Some lenders may have restrictions on the age or mileage of the car they finance.
- Are interest rates higher for used car loans compared to new car loans?
In general, interest rates for used car loans tend to be slightly higher compared to new car loans. However, the specific rates can vary depending on factors such as your credit score, loan term, and the lender you choose.
- Should I get a loan from a dealership or a bank for a used car?
Both dealerships and banks can offer financing options for used cars. Dealership financing may be more convenient, but it’s important to compare rates and terms with other lenders, including banks and credit unions, to ensure you’re getting the best deal.
- Can I refinance a used car loan to get a lower rate in the future?
Yes, it is possible to refinance a used car loan to obtain a lower interest rate in the future. As you improve your credit score or find better loan offers, you can explore refinancing options to potentially save money on your loan.
- How long should the loan term be for a used car?
The loan term for a used car can vary, typically ranging from 36 to 72 months. Consider your budget, the car’s age, and your financial goals when choosing a loan term. Shorter terms generally
result in higher monthly payments but lower overall interest costs.
Always carefully evaluate and compare loan terms, consider your financial situation, and consult with a financial advisor or loan specialist to make informed decisions about auto loans for used cars.