The Best Auto Loans: New & Used Car Loan Rates

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Updated on Thursday, May 27, 2021

Many people walk onto dealership lots confident in what car they want to buy, but clueless about how they are going to finance it. Savvy buyers arrive with their own preapproved car loan. To help you find yours, we looked at thousands of successful applications and researched the best auto loan rates around to come up with this list of top lenders.

*May include autopay discount

 

How we chose the best auto loan rates

We examined thousands of closed loans in Q1 2021. We wanted to know: 1) which lenders consumers chose most often, and 2) which offered the lowest average annual percentage rate (APR). We also looked at the advertised starting car loan rates of large, national lenders to compare.

Best auto loan rates

PenFed Credit Union: Best car-buying and financing service

Penfed Car Buying Service
APR

As low as
0.99%

Terms

36 To 84

months

Fees

No Origination Fee

SEE OFFERS Secured

on PenFed Credit Union’s secure website

Pentagon Federal Credit Union offers the lowest car loan APR we’ve seen that’s not tied to an auto manufacturer. Despite the name, you could join the credit union with zero military ties. Its car-buying service is free and nationwide through car-shopping website TrueCar. Dealerships pay a fee to TrueCar, which helps keep APRs low, but it’s possible you could find lower car prices at other dealerships of your choosing.

Pros and cons

Not everyone will want to use the car-buying service and thus not everyone will qualify for the lowest starting rate. The lowest possible rate without the car-buying service however is still one of the lowest out there. Those APRs start at 1.79% for new cars.


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

Navy Federal CU
APR

1.79%
To
17.99%

Terms

36 To 96

months

Fees

No Origination Fee

Navy Federal advertises its lowest auto loan rate at 1.79% APR for new, used and refinance car loans, but active-duty and retired military members who use direct deposit could get a 0.25 percentage point discount, making the absolute lowest rate 1.54% APR.

Pros and cons

Besides car loans, Navy Federal has excellent prices on other car products, such as guaranteed auto protection (GAP), for which it charges $299. Membership requirements are strict, however. You must have a connection to the U.S. military to join Navy Federal.


LightStream: Best auto loan rates for borrowers with prime credit

LightStream
APR

2.49%
To
20.49%

Terms

36 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.

LightStream auto loans are unsecured, meaning there are no restrictions based on the vehicle’s age, mileage, make or model. The 2.49% APR applies to any auto loan: new, used or refinance. This rate could possibly go lower — LightStream promises to beat any qualified offer from another lender by 0.10 percentage points.

Pros and cons

Because LightStream auto loans aren’t secured by the car itself, they’re counted as a type of personal loan and require strong credit for the lowest rates. Borrowers who prefer in-person banking might find the LightStream experience a bit hands off — it’s an online lender that handles communication mostly through email. That could be a pro if you’re looking for minimal contact. LightStream stands behind its service with a $100 customer satisfaction guarantee.


Consumers Credit Union: Best for open membership requirements

Consumers Credit Union
APR

As low as
2.24%

Terms

84

months

Fees

No Origination Fee

SEE OFFERS Secured

on Consumers Credit Union’s secure website

Joining Consumers Credit Union requires a one-time $5 donation to the Consumers Cooperative Association. You do not need to meet any other requirement to join.

Pros and cons

The lowest rate advertised includes a 0.50 percentage point discount for making automatic payments from a Consumers CU account. The discount is halved if the automatic payments are from another account.


Bank of America: Best for in-person banking

Bank Of America
APR

As low as
2.09%

Terms

12 To 75

months

Fees

No Origination Fee

SEE OFFERS Secured

on Bank of America ’s secure website

As a national bank, there are no membership requirements and several types of car loans here. Bank of America auto loans include car loans for new, used, refinance, lease buyout and private-party purchases.

Pros and cons

Despite the wide range of car loans, Bank of America does have a few restrictions. Loan amounts start at $7,500, which might rule out an older used car you want to buy and vehicles must be no older than 10 years with 125,000 miles or fewer. But if those restrictions aren’t a problem, the fact that Bank of America is a well-recognized brand could inspire confidence.


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

APR

2.99%
To
34.99%

Terms

36 To 72

months

Fees

No Origination Fee

SEE OFFERS Secured

on LendingTree’s secure website

Capital One offers prequalification through its Auto Navigator feature, which allows you to shop for a vehicle and then get an estimate of your auto loan with only a soft credit pull. Unlike other lenders that specialize in working with those with excellent or poor credit, Capital One offers competitive rates for both types of borrowers.

Pros and cons

Capital One only offers car loans through dealers; you can’t get a direct auto loan offer. The good news is it’s easy to find out which dealers are approved and search their inventories. The downside is that a prequalification isn’t the same as a car loan preapproval, a firm APR offer you can take anywhere.


Auto Approve: Best for refinance car loans

APR

As low as
2.25%

Terms

12 To 84

months

Fees

No Origination Fee

SEE OFFERS Secured

on LendingTree’s secure website

Auto Approve offers refinancing and lease buyouts for cars, trucks, SUVs, motorcycles, boats, RVs and ATVs. When you apply, you’ll see potential car refinance offers from multiple lenders without impacting your credit. Once you choose, the lender will do a hard credit pull and give you an official offer for you to accept or reject.

Pros and cons

AutoApprove specializes in refinancing; if you’d like a loan to purchase a vehicle, look at the other lenders on this list. AutoApprove also doesn’t have a public list of its lender partners. If you want to apply to a specific lender, such as a bank or local credit union, go ahead and apply to them directly as well.

How to shop for an auto loan

Before you apply

1. Look up your credit score
Lenders sort applications into credit tiers. Tiers vary by lender, but in general, the higher your score, the lower your interest rate. If your credit score isn’t where you’d like it to be, it would be in your best interest to correct any mistakes on your credit report and/or improve your credit score before applying for a car loan.

If you don’t have the best credit score, don’t sweat too much. Your rate is determined by many factors, including your income, the loan term and the car itself. You could potentially later refinance your bad credit auto loan to a lower rate, after your score improves.

2. Use an auto loan calculator to determine how much you can afford
An auto loan calculator can help you set a budget that includes your monthly payment plus taxes and fees. Sales tax, registration and dealership fees typically add up to about 8% to 10% of the car’s price. If you’re wondering how much to put down on a car, read more about the 20/4/10 rule.

How to apply

3. Get a preapproval, not a prequalification
Dealers can — and often do — raise customers’ auto loan APRs by as much as 2 percentage points for their own profit. That’s why it’s important to get your own offers directly from lenders of your choice. Remember, there are two types of offers, preapproval and prequalification.

A preapproval is a firm offer — including loan amount, term and APR — by a lender that performs a hard credit pull. Prequalifications are estimates based on a soft credit pull or no credit pull. The more offers you get, the more choices you’ll have.

After you sign

4. Make your payments on time
On-time payments are a hugely important element of a strong credit score. Make your payments on time or ahead of time, which may reduce interest fees. Talk to your lender if any problems come up and you need a payment deferral.

5. Keep an eye on refinance rates
Auto loan rates change often and you may find that due to your credit score improving or the larger financial environment, you could get an even lower auto loan rate if you refinance.