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Auto Loan

How to Get a Car Loan With Bad Credit

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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A down payment and a strong cosigner are usually the best ways to get a car loan with bad credit. It may seem challenging to find a bad credit car loan, but there are many lenders willing to work with borrowers who have poor or damaged credit. The challenge is finding an affordable rate and avoiding any scams along the way. Following these steps could help increase your chances of getting approved for an auto loan with a rate and terms that work for you.

Steps for getting a car loan with bad credit

You could go straight to a dealership and apply for a loan, but there could be a better way to get your most affordable bad credit auto loan.

Step 1: Check your credit

There may be an error dragging down your credit score. Check your credit history for free at AnnualCreditReport.com to make sure that there are no mistakes.

If there are mistakes, here’s how to dispute a credit report error. You’ll need to write to the credit bureaus that show the error and the financial institution that gave the incorrect report. Keep copies of the correspondence you send. Once credit reporting agencies receive a dispute, they must investigate and report back to you within 30 days. If you are unsatisfied with the investigation, you could issue a complaint to the Consumer Financial Protection Bureau.

Credit history vs. credit score

Negative information on your credit report can affect your credit score. There are several ways to check your score. When you know your score, you’ll have a general idea about the APR you may receive. While there’s no set minimum credit score for buying a car, the rule of thumb is this: The higher your score, the lower your auto loan rate.

Step 2: Set a car budget

As the modern marvels of machinery that they are, cars are expensive. Americans with the lowest credit scores borrow an average of $15,845 for used cars and $27,867 for new cars. It’s vital to make sure your vehicle is affordable to you. You could use the 20/4/10 rule as a guideline for your car-buying budget: Put 20% down, finance for no more than four years and keep your total transportation costs under 10% of your income.

20/4/10 Rule Example
Gross monthly income

$4,000

10% of gross income

$400

Average cost of car insurance

$78

Estimated cost of fuel

$50

Estimated cost of maintenance

$10

Recommended monthly car payment

$262

Your car ownership costs will vary, but you could use a car affordability calculator to see what could fit in your budget. If you want to get a professional’s opinion on your credit and budget situation before buying a vehicle, the National Foundation for Credit Counseling offers free and low-cost credit counseling.

Step 3: Save a down payment and look for a cosigner

While it’s possible to find a bad credit car loan with zero down payment, down payments can:

  • Increase the likelihood that a lender will make you a loan offer
  • Possibly lower your APR
  • Prevent your car loan from being underwater

The traditionally-recommended down payment is 20% of the car’s price. How much you actually put down is up to you. If you’d like help saving, here are some of the best money-saving apps listed on our site.

A cosigner could help

If you’re having trouble getting approved for a car loan or a car loan at the rate and terms you prefer, a cosigner could help. The downsides are that a cosigner is risking their own credit and possible fees should you default on the loan.

Step 4: Research lenders and get preapproved

Potential lenders could include your own bank, credit union or online lender. We looked at more than 100,000 subprime auto loan applications and chose the three top bad credit car loan lenders based on popularity and average APRs borrowers received.

Best Lenders for Bad Credit Car Loans
LenderAverage APR for Subprime BorrowersAmountsTerms
Capital One

12.50%

$4,000+36-84 months
RoadLoans

17.84%

$5,000 - $75,000Up to 72 months
Carvana

19.39%

Not available36-72 months
Source: LendingTree customer data, Q2 2020

Whichever lender you choose, applying for a preapproval — ideally, more than one — before you go to a dealership. Dealers can and often do raise a customer’s interest rates. Ergo, it’s best to cut out the middleman and apply directly to a lender.

Consider a personal loan instead

If you’re having trouble getting a car loan, a personal loan might be an option. The pros of using a personal loan to buy a car include flexible loan amounts and no restrictions on vehicle age or mileage. However, personal loans tend to have higher APRs than auto loans.

Step 5: Negotiate at the dealership

By getting a loan preapproval, you can walk into the dealership focused on getting your best price possible on your new car. Dealers will try to distract you with their own loan offers and talk of monthly payment. A car-buying secret is to keep your focus on the total price of the vehicle. Once that’s set, see if the dealer can beat your preapproved loan rate. Pay attention to how long the loan term is. Even with a lower rate, you may end up paying more in interest over a longer loan.

Here’s more on how to negotiate car price and when to walk away.

Step 6: Sign and set up automatic payments

Finalize the paperwork with the seller and drive off with your car. You may have up to 30 days from the day you sign until your first payment and it may take almost that long for your state government to process the paperwork and get the permanent vehicle registration to you.

Some lenders will offer you the chance to sign up for automatic payments at the same time as when you sign for the car loan. Other lenders will contact you regarding payment methods.

Set up automatic payments so that it’s easier to make all payments on time. You’ll still be able to pay off your car loan faster, if you choose.

Refinance for a better rate later. Paying your car loan on time could help increase your credit score and decrease the amount you owe. You could refinance your bad credit car loan to a better rate after roughly two years, give or take.

Avoid bad credit car loan scams

Buy-here, pay-here dealerships advertising “No credit? Bad credit? No problem!” often come with high rates and fees. They know that many customers who walk in may not qualify at traditional dealerships and instead depend on used-car businesses that serve as their own banks.

“In general, buy-here pay-here financing is just overpriced junk,” said Rosemary Shahan, founder of Consumers for Auto Reliability and Safety (CARS) Foundation. “There are just too many games that they can play.”

Some in-housing financing may be reputable, but unscrupulous businesses have been known to use these tactics:

Yo-yo financing

Yo-yo financing is when dealers allow you to sign a contract at one rate, and then change the terms of the contract a few weeks after you’ve taken the vehicle home. They usually claim that the “financing fell through” and you need to sign a new contract at a higher interest rate.

To protect yourself, keep copies of all loan documents you sign, and don’t drive away with a car until you’ve signed for it.

Fees, overpriced extras

There are dealer fees that can’t be avoided, then there are fees you typically won’t find with traditional lenders, such as loan origination charges or steep late payment fees. These may come on top of overpriced extras. If you want add-ons like extended warranties, do your research ahead of time. You’ll most likely find them elsewhere for less.

Undervalued trade-ins

Your old vehicle is an asset and you should get as close to Kelley Blue Book value as possible if you decide to trade it in. Some shady dealers will undervalue your vehicle, leaving you with less money to put toward your new car. Financing a larger amount than necessary at high rates and fees is exactly what the unscrupulous dealer is hoping for. A private sale will almost always yield the biggest bang for your buck, but that might be inconvenient for you.

Mechanically unsound vehicles

Some unscrupulous used car dealers sell lemon vehicles to unsuspecting customers and worse, label them “certified pre-owned.” Legitimate CPO vehicles are generally sold through franchised dealers with the automaker’s seal of approval. Protect yourself by checking for safety recalls. If the dealer doesn’t provide a vehicle history report, there are several places you can buy a VHR for yourself.

Remember, once you’ve purchased the vehicle, it’s very difficult to return it.

Bad credit car loan FAQs

Deciding on whether to buy a new or used vehicle? Due to depreciation, buying a three-year old vehicle can mean you only pay about half of what the vehicle costs new, and the car still has most of its life span left. Borrowing less for a car may also increase your loan approval chances.

Try to steer clear of 84-month car loans. Yes, it’s a way to lower your monthly payment, which may be important in finding an affordable auto loan. But the risks usually outweigh the benefits: higher interest charges plus a greater likelihood that you’ll wind up underwater on your car loan. By the end of those seven years, you could be on the hook for monthly car payments and repair costs.

Purchasing a car before filing for bankruptcy can be seen as a sign of fraud. You may be able to buy a car during your bankruptcy.

Yes, but it might be best to wait a year or two instead of immediately getting a car loan after a bankruptcy is discharged. This could allow you to attain a car loan with lower interest.

If you don’t get approved for an auto loan, ask the bank why. Do you have insufficient income? Do you have a recent auto repossession on your credit report? Finding out why could help you fix the problem. Just because one lender didn’t provide a loan offer, doesn’t mean you can’t get a car loan.

This depends on the lender and your application. Some banks, credit unions or online lenders will not lend to you unless you have a cosigner. The cosigner agrees to pay for your loan if you stop making payments. If you have low income and bad credit, you’ll probably need a cosigner.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Auto Loan, Reviews

The Best Auto Loans: 2020 New & Used Car Loan Rates

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Just because cars are getting more expensive doesn’t mean your car loan has to break the bank. Car payments have been hitting new highs recently, and with the added economic pressure that COVID-19 may be causing, finding your best auto loan rate is more important than ever. To that end, we looked at more than 800,000 successful loan applications from over 28 lenders to find the best auto loan rates.

Best Auto Loan Rates
LenderNew Car Starting APR*Used Car Starting APR*Terms (months)Amounts
Best overall: Consumers Credit Union

2.69%

2.94%

0-84

Up to $100,000

Best auto loan rates for prime and subprime credit: Capital One

3.39%

3.39%

36-84

$4,000+

Best for midprime credit: LightStream

3.49%

3.49%

24-84

$5,000-$100,000

Best for a completely online experience: Carvana

N/A

3.90%

36-72

Not available

Best for those with a military affiliation: Navy Federal Credit Union

1.79%

2.29%

12-96

$250 min., no max

Best auto refinance rates: Auto Approve

N/A

1.90%

12-84

$8,000-$100,000

*Starting APRs may include an autopay discount.

Best auto loan rates overall: Consumers Credit Union

Consumers Credit Union
APR

As low as
2.69%

Terms

84

months

Fees

No Origination Fee

SEE OFFERS Secured

on Consumers Credit Union’s secure website

Don’t let the words “credit union” scare you off. Consumers Credit Union offered the lowest average APR across all credit tiers among lenders we examined. Joining the national financial institution only requires a one-time payment of $5 to the Consumers Cooperative Association; unlike some other credit unions, you don’t have to live in a certain county or work for a certain employer to qualify for membership. However, if you prefer to apply for an auto loan in person, Consumers Credit Union only has branches in Illinois.

Consumers Credit Union rates

APRs for cars that are model years 2018 and newer start at 2.69%; used cars that are model years 2014 to 2017 start at 2.94%. For used vehicles 2013 and older, the lowest possible APR is 5.49%.

Pros of a Consumers Credit Union auto loan

Getting a preapproved auto loan is important to getting your best auto loan rate. Not all lenders offer them, but Consumers Credit Union does.

Cons of a Consumers Credit Union auto loan

The lowest starting rates that Consumers Credit Union advertises includes a 0.50 percentage-point discount that borrowers can receive by making automatic payments from a Consumers Credit Union account. That discount is halved if you make automatic payments from another financial institution and it disappears if you don’t make automatic payments at all.

How to apply

You could apply on the Consumers Credit Union website or by calling 877-275-2228.

Best auto loan rates for prime and subprime credit: Capital One

Capital One
APR

3.39%
To
11.25%

Terms

36 To 84

months

Fees

No Origination Fee

SEE OFFERS Secured

on LendingTree’s secure website

Known primarily as a credit card provider, Capital One is one of the largest banks in the U.S. Its size might account for why it’s good for borrowers on both ends of the credit spectrum: among lenders we studied, Capital One offered the lowest average auto loan rates for those with prime (740+) and subprime credit scores (579-). Capital One’s 3.39% starting APR is for new and used vehicles.

Pros of a Capital One auto loan

The Capital One Auto Navigator program gives car buyers a ballpark idea of the car loan rate they can expect and connects them to its network of 12,000+ partner dealerships.

Cons of a Capital One auto loan

The Auto Navigator program offers prequalifications, not preapprovals. This means you’ll have to fill out a complete credit application at a participating dealership. Only then, would you know your exact rate and terms. The dealership is your only car-buying route with Capital One — it does not permit private party auto loans.

How to apply

You could apply for a Capital One auto loan prequalification.

Best auto loan rates for midprime credit: LightStream

LightStream
APR

3.49%
To
20.49%

Terms

24 To 84

months

Fees

No Origination Fee

*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.49% APR with a term of 3 years would result in 36 monthly payments of $292.98.

The online lender LightStream offered the lowest average APR to applicants with midprime credit (580-739) among lenders we inspected. LightStream’s starting used car loan rates are the same as the rates it offers for new car loans. The company is a division of Truist, which formed from the merger of SunTrust and BB&T in 2019.

Pros of a LightStream auto loan

If you receive an auto loan offer with a lower APR, LightStream will beat it by 0.10 percentage points. And if you aren’t completely satisfied with your customer experience, $100 will be deposited into your account, provided you fill out a questionnaire within 30 days of closing on your loan.

Cons of a LightStream auto loan

The lowest advertised auto loan rates include a 0.50 percentage-point autopay discount, which disappears if you don’t enroll in autopay. LightStream does not offer preapprovals — although you could get a regular approval that’s good for 30 days and then go to the dealership.

How to apply

The only way to apply is through the LightStream website.

Best auto loan rates for a completely online experience: Carvana

Carvana Auto Loan
APR

3.90%
To
28.00%

Terms

36 To 72

months

Fees

No Origination Fee

SEE OFFERS Secured

on LendingTree’s secure website

Across all credit tiers, Carvana is a popular choice among used car buyers. It offers “touchless” car delivery, removing the human element almost entirely from a car-buying experience that’s already online. This could be a major plus when COVID-19 is a concern.

Pros of a Carvana auto loan

Because it’s online, Carvana provides a lot of photos and information about its cars. It has a payment calculator on every car result page to help you crunch numbers.

Cons of a Carvana auto loan

Although it was a popular choice for the best auto loan rates, some other lenders offer lower average APRs. Plus, your vehicle choice is limited to what Carvana has in stock. Lastly, getting your car might be inconvenient or expensive if you live far from a Carvana center.

How to apply

Pick out the vehicle you want on Carvana and then click the “get started” button.

Best auto loan rates for those with military connections: Navy Federal Credit Union

Navy Federal CU
APR

1.79%
To
17.99%

Terms

12 To 96

months

Fees

No Origination Fee

Navy Federal offers the lowest starting auto loan rate on this list. But there’s a catch — you must meet a strict set of membership requirements. New vehicle rates start at 1.79%; late model used vehicles could qualify for rates starting at 2.29%. Navy Federal defines late model vehicles as model years 2019 and newer with 7,500 to 30,000 miles. Older vehicles or those with more miles qualify for rates starting at 3.89% APR.

Pros of a Navy Federal auto loan

You could potentially get an additional 0.25 percentage-point discount off the lowest rate if you meet two additional criteria: you are an active-duty or retired military member and you pay by direct deposit on a new auto loan.

Cons of a Navy Federal auto loan

You must have a connection to the U.S. military in order to qualify for Navy Federal Credit Union membership and therefore a Navy Federal auto loan. See Navy Federal’s membership page for full details.

How to apply

Once you are a member, you can apply for an auto loan online through your account or by calling Navy Federal at 888-842-6328.

Best auto refinance rates: Auto Approve

Auto Approve
APR

As low as
1.90%

Terms

12 To 84

months

Fees

No Origination Fee

SEE OFFERS Secured

on Auto Approve’s secure website

Auto Approve offered the lowest average refinance rates and was the most popular choice among 22 lenders we examined. It offers refinancing for cars, trucks, motorcycles, RVs, boats and ATVs, as well as loans for lease buyouts.

Pros of an Auto Approve car refinance

Auto Approve assigns individual loan consultants to applicants, so you’ll have one person who will guide you through the car refinance process. The company also handles documents for you that are required by your state’s Department of Motor Vehicles (DMV).

Cons of an Auto Approve car refinance

Auto Approve is not a lender, but a loan marketplace. It performs a soft credit pull to show you potential offers from actual lenders when you apply on their site. A soft pull is not always accurate and when the lender you choose does a hard pull, your final offer may be different from what you expect.

How to apply

Visit Auto Approve or call 844-336-3365 to submit an application.

How we choose the best auto loan rates

To find the best new, used and refinance auto loan rates, we analyzed more than 800,000 successful applications with dozens of different auto lenders made through the LendingTree platform from November 2019 through April 2020. We wanted to know: 1) which lenders consumers chose most often, and 2) which offered the lowest average APR over the course of a six-month period.

To find the best rates for those with military connections, we looked at rates offered by USAA Bank, Navy Federal Credit Union, Pentagon Federal Credit Union and Randolph-Brooks Federal Credit Union, and chose the one with the lowest advertised APR for a traditional new car loan not including any other discounts that may be available, such as discounts for using a car-buying service.

What to do before getting an auto loan

Look up your credit score

Lenders sort applications into credit tiers. Tiers vary by lender, but the interest rate you receive heavily depends on where you fall.

Here’s an example of how different APRs affect the cost of financing a car.

Borrowers with the lowest scores could pay about $16,000 more in interest charges over the life of an 84-month $25,000 car loan.

How Credit Score, APR and Interest Charge Relate
Credit ScoreAverage APRInterest Charge
720 or higher

6.62%

$6,306

680-719

7.13%

$6,828

660-679

8.57%

$8,331

640-659

11.47%

$11,478

620-639

13.32%

$13,569

580-619

15.02%

$15,547

560-579

17.44%

$18,451

Less than 560

20.85%

$22,714

Average APRs based on LendingTree users in May 2020.

Bad-credit car loans

If you don’t have the best credit score, don’t sweat too much. There are bad credit car loans available and steps you can take to improve your credit score. Ultimately, the rate that you obtain is determined by many factors, including your credit score and income, how much you borrow versus how much the car is worth, the car itself, as well as the loan term.

You could potentially refinance your bad credit auto loan after six months to a year for a lower rate, after your score improves.

Choose your auto loan term carefully

The length of your loan is known as the loan term. There are disadvantages and benefits of long loan terms. The longer the term, the lower your payment but the higher the amount of interest you’ll pay over time. For example, for someone with good credit, choosing a $20,000 auto loan with a 6% APR over 48 months versus 60 months will drop your payment by $83 per month, but you would pay an additional $653 in interest over the life of the loan.

How Loan Term, Payment and Interest Charge Relate
Loan TermMonthly PaymentInterest Charge
36 months

$608

$1,904

48 months

$470

$2,546

60 months

$387

$3,199

72 months

$332

$3,865

84 months

$292

$4,542

Use an auto loan calculator

To see the bottom line on an auto loan you’re considering, use an auto loan calculator. Here are three types of auto loan calculators. You could use the auto affordability calculator to help set your budget before you apply for auto loans. Then, when you’re car shopping, you could use the payment calculator to estimate your payments and see the total finance charge.

Estimate 8%-10% in taxes and fees

You’re going to pay more for a car than what’s on the windshield sticker. Taxes, registration and dealership fees can have a sizable impact on what you pay, about 8% to 10% of the car’s price.

If you’re trying to decide how much to spend on a car, consider the 20/4/10 rule. To see how a car might fit into your larger household budget, check out the 50/30/20 rule

Research add-ons

Dealerships and some lenders like to sell add-ons by telling a potential customer that their payment with a warranty is $500. What the salesperson doesn’t say is that the warranty costs $2,000 and without it, your monthly payment is $480. Research add-ons such as an extended warranty or guaranteed auto protection (GAP) before you head to the dealership so you’ll be prepared.

Common Auto Loan Add-on Prices
Add-onTypical PriceEstimated Increase in Monthly Payment
Extended Warranty

$2,000

$20

Auto GAP Insurance

$800

$8

Tire & Wheel Insurance

$900

$9

Appearance Package

$1,000

$10

Get a preapproval, not a prequalification

A preapproval is a firm offer by a lender that performs a hard credit pull. In a preapproval offer, you’ll see the maximum amount you can borrow plus your APR, loan term and estimated payment. It’s vital to get one because dealers can often raise customers’ auto loan APRs by as much as 2 percentage points for their own profit. Apply to a few lenders directly, without the dealership being in the middle, so you know what APR you deserve and get your best auto loan rate.

A prequalification is when a lender does a soft credit pull or no credit pull and gives you an estimate or an example of the auto loan you may get. When you do get a firm offer from a lender, it may be very different from your prequalification.

Apply to a few lenders

When searching for your auto loan, apply to a few lenders of your choice. All inquiries within a 14-day period count as one inquiry, so they will have only a minimal impact on your credit score.

Consider a cosigner. If your credit score or income is low, and you’re not receiving good offers when you apply to a few lenders, consider getting a cosigner. A friend or family member cosigning could make a big difference on being approved for an auto loan and in getting a good auto loan offer.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Advertiser Disclosure

Auto Loan

Tesla Financing and Lease Options

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

It’s no secret that Teslas are expensive, but Tesla financing doesn’t have to be. Tesla financing rates start at 2.99% APR and the automaker offers car loans on all of its current passenger vehicles in production: models S, 3, X and Y. Terms range from 36 to 72 months depending on the model. If you’d like to do a Tesla lease, you’re a bit more constrained; only models S, 3 and X are available to lease and for a term of 24 to 36 months. But if you want a potentially lower rate or different term than what’s available through Tesla, look for your own financing from your bank, credit union or online lender.

Tesla financing and lease options

The available Tesla finance terms depend on the model you want. You could finance up to 100% of the car’s value, but you must cover the taxes and fees out of pocket. Unlike other financing options, Tesla financing does not allow you to roll these taxes and fees into the total loan. Tesla notes that taxes and additional fees can add up to 10% of the vehicle’s purchase price, which includes a nonrefundable $100 order fee and a $1,200 destination and document fee on new vehicles.

Tesla Financing and Lease Options
Model 3Model SModel XModel Y
Finance Terms48, 60, 72 months36, 48, 60, 72 months60, 72 months48, 60, 72 months
Lease Terms36 months 36 months* 36 months*Not available
Annual Lease Mileage Options10,000, 12,000, 15,00010,000, 12,000, 15,00010,000, 12,000, 15,000Not available

*A 24-month lease may be available based on where you live.

If you’d like to see what your payment would be or which Tesla you could afford based on a payment you want, use a car financing calculator.

Consider another lender

However, keep in mind that you don’t have to finance through Tesla to get a car loan for a Tesla. Don’t discount the idea of other lenders because they may in fact have discounted rates, and you could get a better deal. For example, Suncoast Credit Union in Florida offers a 2.50% starting rate for “green cars” — electric vehicles or vehicles with 28 MPG or more. Shop around! There are other potential lenders out there. Here are some of the best auto loan rates that we found.

How to finance a Tesla

1. Get a preapproval

To apply for purchase financing through Tesla, you first have to order a Tesla. This is backward compared with the typical vehicle financing process, and we recommend rate shopping and getting a car loan preapproval before ordering a Tesla. This way, you get a firm idea of your payment and can compare auto loan offers, including one from Tesla, to get the best rate.

2. Order your Tesla

You must choose a specific vehicle, either a new or used car in inventory, or configure a new vehicle from the factory, and place the order. Below is an example of a Tesla order agreement. It shows your personal information, the price of the car and any/all upgrades you choose, plus the $1,200 destination and document fee. This agreement does not include any taxes or government fees you may have to pay based on where you live. It also does not include a transportation fee if you’re buying a used Tesla and want it delivered to a location near you. (Delivery costs for new cars are covered in the destination and document fee.)

3. Apply for Tesla financing

When you’ve completed your order, the Tesla website will ask you how you would like to pay. The four options provided are cash, loan arranged through Tesla, lease arranged through Tesla and self-arranged financing.

From there, the application for Tesla financing will ask for further personal information from you and your cosigner, if you have one. You already provided your name, address and contact details when you placed the order. Now you’ll need to list your Social Security number, how much you want to put down, how much you want to borrow and for how long you want your loan term.

4. Compare offers

A member of the Tesla Financial Services team will contact you within 48 hours after you submit an application. You also have the option of contacting them via email at [email protected]. If you are approved, compare the Tesla financing offer to your preapprovals and choose the best one.

Your Tesla approval is good for 60 days. This is double the normal 30-day approval time as it’s meant to cover any potential delivery delays. But if you don’t pick up your Tesla (or have it delivered) and sign the loan documents within that 60-day window, your approval expires. You may have to apply again and your APR offer may change, depending on the market at the time.

Beware of delivery delays

If your Tesla isn’t ready within that 60-day window and you apply again, the application for credit will ding your credit score again as it would be well outside of the 14-day rate-shopping window that the credit bureaus allow. Tesla has had some pretty significant production delays in the past so it’s something to keep in mind if you decide to finance through Tesla.

5. Choose a loan and make payments

To accept an offer, contact the lender and follow through on the paperwork and set up a payment date. To dismiss an offer, do nothing. Auto loan offers expire automatically.

Whichever loan and lender you choose, follow through with the lender to finalize the loan and set up payments. We recommend setting up automatic payments so there isn’t a chance you’ll forget and miss a payment. Some lenders also provide a rate discount if you make automatic loan payments.

What about the Tesla Cybertruck financing?

Cybertruck financing is not currently available as the vehicle isn’t in production. You could place an order for one and pay the nonrefundable $100 fee, but you cannot fully configure your dual- or tri-motor Cybertruck until late 2021, which is when production will start. Single-motor Cybertruck production is expected to begin in late 2022.

How Tesla leasing works

To apply for Tesla leasing, you don’t have to order a car, but you need to register for a Tesla account and choose the model you want. A Tesla Model 3 lease is a popular option, but you could lease the Tesla Model S or X as well. No matter the model, you still have to pony up a $100 order fee and a $1,200 delivery fee for a Tesla lease. But you do not have to order a specific car before applying to lease and your lease approval is good for a full 90-day window, meaning you have about three months from the date you’re approved to receive your new car and sign the papers.

Mileage, term options

For all Tesla leases, you could choose between three mileage options: 10,000, 12,000 and 15,000 a year. But you have limited term options: in some locations you have 24 months while others only offer 36 months. Tesla does not offer longer or shorter lease terms. However, if your account is in good standing toward the end of your lease, you could request up to a six-month lease extension.

End-of-lease options

Tesla offers regular end-of-lease options: you could turn in your vehicle, buy it or turn it in and get a new Tesla. The exception is the Tesla Model 3 lease. Unlike most car leases, you cannot buy the Model 3 at any point during the lease, including at the end of the lease term.

Tesla financing and leasing are not available in all states. Leasing is available in 39 states — Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming — and in the District of Columbia.

What about a Tesla lease takeover?

It is possible as a current Tesla lease holder to have someone else take over the lease if they do so in the first 24 months and if Tesla approves the other person based on their credit. You could read more about taking over a car lease.

What about Tesla lease insurance?

Leasing requires special levels of auto insurance as decided by the lessor. For a Tesla lease, you must have a maximum deductible of $2,500 and maintain full coverage auto insurance with at least:

  • $50,000 for property damage
  • $100,000 for bodily injuries to any one person
  • $300,000 for any one accident
  • Physical damage insurance for full value of vehicle

All Tesla leases come with guaranteed auto protection, or GAP, insurance, which covers any difference there might be between what insurance pays and what you owe if the vehicle is totaled.

Is Tesla financing worth it?

The best way to answer this question is to compare a Tesla financing offer with other car loan offers you attain from lenders. If the Tesla loan offer is competitive and beats your preapproval rates, go for it. If it doesn’t beat your other car loan offer, then go with that one.

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