# Shopping for a New Car? Use the 20/4/10 Rule

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Imagine you’re in the market for a new vehicle. Where do you begin your car-buying process? Do you already have a dream make and model in mind? What’s your budget? Are you already browsing the interwebs for the car you want? If you are, you’re already starting off on the wrong foot — at least according to the 20/4/10 rule.

## What is the 20/4/10 rule?

The 20/4/10 rule helps car shoppers figure out how much car they can actually fit into their budget before falling in love with a vehicle they can’t afford. It emphasizes calculating what you can afford before you set out shopping.

The rule might seem obvious — before you buy something, you should make sure you can afford it, right? — but it gets tricky when it comes to financing, and many don’t take the time to include annual ownership costs. If you don’t, you could end up with monthly transportation costs that could force you to live paycheck to paycheck or take on more debt.

Follow the 20/4/10 rule, and you might avoid accidentally biting off more than you can chew.

### Rule #1: Put down at least 20%

A vehicle is a depreciating asset. The experts at Carfax estimate a new car loses 10% of its value the moment you drive off the lot. And the depreciation continues from there. Edmunds.com estimates a new vehicle loses over one-fourth of its value in the first year alone. For that reason, you should be prepared to put down at least 20% of the purchase price. If you do this, you’ll finance payments for the vehicle’s actual estimated value when you leave the lot instead of the full purchase price, which the vehicle isn’t worth anymore.

Take this example: You finance a new car for its full purchase price of \$34,000, then lose your job the next day. Now, you might need to sell your new car, but you can sell it for only \$30,600 — because the car already lost 10% of its value once it left the lot. Since you put \$0 down at financing, you’ll still owe \$34,000 after the sale. On the other hand, if you’d put down at least \$6,800, you could sell the car that day for its estimated value and only lose out on half your down payment.

You might not be able to estimate exactly how much car you can afford, but if you are able to put down at least 20% of the purchase price, you should be in an OK financial position. On top of that, you’ll have smaller payments and possibly finance it for a shorter period.

### Rule #2: Finance the vehicle for no more than four years

The longer your financing agreement is, the more you’ll pay in interest over time. So don’t be swayed by dealers or lenders who try to sell you on a lower monthly car payment — chances are your payment is so low because the term of your loan is long.

You can use the MagnifyMoney loan calculator to see this rule at work. If you borrow \$25,000 to purchase a car (at a 4% APR) and agree to a six-year financing deal, you’ll wind up paying \$3,161 in additional interest charges by the time you pay off the loan.

If you agree to a four-year loan instead, you’ll pay just \$2,095 in interest — a savings of over \$1,000. Of course, that shorter term loan also comes with a higher monthly payment — \$564 versus \$391 — but you are saving more over the long term.

Think of it this way: If you can’t afford the monthly payment required to pay off the car in four years or fewer, it’s probably outside of your budget.

### Rule #3: Keep your total transportation costs under 10% of your monthly income

This last part is where it gets easy to overspend. You should try to keep your total transportation costs — your car payment, insurance, gas, and maintenance — under 10% of your monthly income.

So, if you earn \$5,000 per month, your total transportation costs shouldn’t cost more than \$500.

## How to save on the cost of a new car

Try these tips to keep your overall transportation costs low.

### Get pre-approved for financing

Avoid financing your vehicle through the dealer, and get pre-approved for financing at a lower rate before you show up at a dealership. Financing your auto loan at a lower rate can reduce your monthly loan payment. If you walk onto the lot with a pre-approved auto loan rate from a bank or credit union, you can use that as leverage for negotiation.

However, if you let the dealer find the loan for you instead, you’ll lose negotiating power, and there won’t be a way for you to tell if the dealer’s loan rate is the best offer you can get. Avoid making these other common mistakes when searching for a car loan.

More people are purchasing used cars than ever before and saving a bundle in the process, according to Edmunds. Over 38 million vehicles sold in 2015 were used, a year-over-year increase of 5.6%.

When you buy used or certified pre-owned vehicles, you avoid financing a larger balance, and could even skip financing altogether if you’ve got enough cash on hand. If you buy used, avoid engine trouble by having the vehicle inspected by an independent mechanic before you sign off. You can use a resource like Car Talk to find a mechanic in your area.

### Buy a car that holds its value

Depreciation is a car owner's largest transportation expense during the first five years of ownership, more than fuel, maintenance, and even insurance.

A car that holds value well will depreciate less over time compared to the average vehicle, so you may not lose out on as much in depreciation costs if you sell the vehicle after a few years. Carmakers like Honda and Porsche are known for building vehicles that hold their value well over time according to Kelley Blue Book.

Leasing a car will usually result in a lower monthly payment, and you’ll likely save money with a lower down payment and lower tax fees over time. However, you could be subject to extra charges if you ding up the vehicle, or drive more miles than stated on the lease agreement. It doesn’t always work for everyone, so consider your personal needs first.

On the plus side, you’ll upgrade to a new vehicle every few years and won’t need to deal with the hassle of selling a car.

### Look for gas savings

Gas isn’t always an unavoidable expense. You can make a few changes to your fueling habits like filling up before you hit “E” or signing up for a gas rewards credit card to save money. You could also cut down transportation costs by cutting back how often you drive or by carpooling some days to school or work. Learn more ways to reduce your gas spend here.

### Comparison shop

Don’t get lazy with must-haves like maintenance and insurance for your vehicle. Comparison shopping is the best way to save on costs like these that may differ from provider to provider. Insurance companies have made it easier to compare quotes with online comparison portals like this one from Progressive. You could also try going through your bank or credit union for discounted rates with select companies.

Don’t just take the first estimate you get for a repair. Mechanics are known to pad the bill with unnecessary repairs from time to time. After you figure out what’s wrong with you vehicle, get an estimate from a few different mechanics in your area. That way you’ll make sure you’re getting the best value before paying for maintenance and repairs.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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# Capital One Auto Loan Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you’re going into a dealership without first shopping around for an auto loan, then you may be leaving money on the table. That’s because the dealership may not offer the best rate, so you may be driving your newly financed car with a less-than-attractive APR.

The prevalence of online lenders makes the preapproval process super simple. If you do get preapproved, you’ll increase your chances of negotiating a better price for the car you want, and the dealership may even try to beat other loan offers. With any loan, shopping around is always recommended. Here we’ll look at the Capital One auto loan, its details and how it compares to others. (All rates and figures are current as of March 16, 2018.) We’ll also go over how to apply for one.

### What is Capital One?

Richard D. Fairbank founded Capital One in 1988, and the bank is headquartered in McLean, Virginia. Capital One is now one of the largest banks in the U.S. based on deposits, and it offers personal banking products including deposit accounts, credit cards and loans, as well as small business and commercial banking products.

### Capital One auto loan details

Capital One’s Auto Navigator program offers APRs for new cars as low as 3.24% and used cars as low as 4.14%. The rate you receive will depend on the loan term, your credit history and loan-to-value ratio. Financing terms range from 36 to 72 months (three to six years), and you’ll need to take out a minimum of \$4,000. The maximum amount you can finance depends on the value of the car you intend to purchase, up to \$40,000. This amount could include the sales price, tax, licensing fees and other optional products like an extended warranty from the dealer.

Capital One’s loan program serves people who want to purchase a new or used vehicle, including minivans, SUVs and light trucks intended for personal use. It does not allow borrowers to finance other types of vehicles such as RVs, boats or motorcycles, as well as certain makes of vehicles. The car you intend on purchasing must have less than 120,000 miles on it, and the model year has to be 2006 or newer, with the exception of some states where it needs to be at least a 2008 model.

To get a loan, first request prequalification, and if you get it, present this offer to the dealer. You’ll then fill out a credit application at the dealer so Capital One can match the loan terms, once the participating dealer submits it. To prequalify, you need to be at least 18 years old with a valid U.S. address and a minimum monthly income of \$1,500 or \$1,800, depending on your credit situation.

### Where Capital One auto loans stand out

• Competitive rates: Capital One offers rates on par with other major retailers. Though its rates are slightly higher than what credit unions offer, it’s important to remember that some of those institutions have strict membership requirements.
• Range of terms: You get a choice of four financing terms ranging from 36 to 72 months.
• Choice of dealerships: You can choose from 12,000 participating dealerships to purchase a vehicle of your choice.
• No prepayment penalties: You can pay more than the minimum balance due and won’t face any fees. If you choose, you may be able to shorten the loan term if you pay off your remaining balance.
• Online preapproval: Capital One offers an easy to follow application process to find out how much you could finance.

### Where Capital One falls short

• Low maximum loan amount: Other competitors offer loans up to \$100,000, which could come in handy if you’re looking to purchase a pricy vehicle.
• Financing only valid at eligible dealers: Capital One doesn’t finance vehicles bought through private party sellers or auto brokers. You also can’t use financing for a lease buyout.
• Can only borrow a maximum of 80% of the vehicle value: Borrowers need to have a loan-to-value ratio of 80% or less.
• Not all vehicles qualify: You can’t finance recreational vehicles, including motorcycles, ATVs and RVs. Capital One also doesn’t finance vehicles for commercial use.

### How to apply

To get auto financing through Capital One’s Auto Navigator program, first fill out an application to see if you prequalify for a loan. On the first page of the form, it’ll remind you of the terms of the loan, such as the minimum and maximum loan amount and the condition of the car you’re looking to purchase. You’ll need to fill in your personal information such as name, birthday and Social Security number. Then you’ll be asked to provide employment and residence information before submitting the form. Documents you may need to provide include a utility bill in your name dated within the last 30 days as proof of residence and a recent pay stub as proof of income.

Once you’re qualified, you can head to more than 12,000 participating dealers to search for cars. You can browse online and save the listings for your favorite cars for up to 30 days. For most listings, you’ll be able to see the advertised price and financing terms. Those terms are based on what you prequalified for, and you get to see the APR and monthly payments specific to you. You can customize loan options such as the down payment amount, loan term and even your monthly payments.

At the dealership, you can negotiate the price of the vehicle and tally up the total costs including taxes, sales price and licensing fees. You can still make any changes to your loan offer and review the financing terms before completing a credit application at the dealer.

Capital One will keep your prequalification offer for 30 days. You can use your offer at the dealership up to the date of expiry. After that, you’ll need to submit another application form.

on Capital One’s secure website

### The fine print

Capital One makes information readily available on its website. It clearly outlines the application process from start to finish, including terms related to loan amounts and other financing terms. On its auto loan page, Capital One has a detailed frequently-asked-questions section that offers transparent information. Before you even decide whether to get preapproval, you can use the calculator on their auto loan page to see how much you could be paying.

Here are also a few other things to note:

• You can’t purchase Oldsmobile, Daewoo, Saab, Suzuki or Isuzu vehicles with Capital One financing.
• Auto financing is based on a simple interest loan. Your payments will be applied to interest first, then the principal. If you pay more than the minimum monthly payment, the money will go toward interest, outstanding fees then the principal.
• You may need to provide additional documents before finalizing your loan. Capital One offers borrowers the option to upload these items before going to the dealer, or bring them along when purchasing the vehicle.
• The Auto Navigator website can’t guarantee that the dealer will have the actual car and sale price advertised. You’ll need to ask the dealer about availability.
• Once you purchase a vehicle, it’ll become a retail installment contract, stating that the dealer is the original creditor.
• You may need to put down cash if the total cost of the vehicle is more than your maximum loan amount. This includes the amount after you trade in a vehicle, if applicable.

### PenFed

This credit union requires you to become a member in order to apply for an auto loan, but it’s easy to join. All you need to do is to make a one-time donation to the National Military Family Association for \$17 or the Voices for America Troops for \$17. Then, you’ll need to fund your share account with a minimum of \$5.

PenFed offers rates as low as 2.20% APR for new cars and as low as 2.99% APR for used auto loans, both up to \$100,000. Terms range from 36 to 72 months (three to six years) for used vehicles and 36 to 84 months (three to seven years) for new ones. Rates depend on how much you finance and what term you choose.

If you’re looking for lower monthly payments, PenFed offers a Payment Saver auto loan for new and used vehicles. You can make a lower payment than a conventional auto loan, but at a higher interest rate. You’ll pay back the remaining balance at the end of your loan. For new vehicles, they must never have been titled and be the current or prior model year. For used vehicles, it can be anywhere from the prior two years up to the current model and can’t exceed 15,000 miles per year.

on PenFed Credit Union’s secure website

### Lightstream

A division of SunTrust Bank, Lightstream offers loans for new and used cars with terms ranging from 24 to 84 months (two to seven years). It offers APRs from 3.09% with a loan amount up to \$100,000. This APR only applies to those who are enrolled in automatic payments. If you don’t enroll in autopay, you’ll pay an extra 0.50% APR, meaning rates start at 3.59%. Your actual rate will depend on the financing term, the amount you take out and your credit history.

You can use the funds for any type of vehicle, with no restrictions on the dealership or the model, make or mileage on the car. You can also use the loan to purchase new or used motorcycles, lease buyouts and vehicles from individuals. Unfortunately, you can’t get a preapproval, meaning you’ll need to complete and submit a loan application online. The benefit is that if you’re approved, you may be able to receive the money within one business day.

Lightstream offers a guarantee that you’ll love their service. If not, they’ll email you a questionnaire for you to fill out within 30 days of loan closing. Once completed, they’ll deposit \$100 into your account.

on LightStream’s secure website

### Bank of America

Bank of America is one of the largest banks in the U.S. and it provides a wide variety of banking, investing and loan products and services. Their auto loan program is for dealer purchases, lease buyouts and purchases from another individual. You can’t use their financing for recreational or commercial vehicles. If you’re not purchasing a vehicle from a private party, Bank of America only allows you to purchase cars from franchise dealers or one of their approved independent dealers.

Rates for their loans start from 2.89% APR for new cars, 3.19% for used cars. If purchasing a car from an individual, you can apply for a private party loan by visiting a financial center. Preferred Rewards clients are eligible for a rate discount. Gold customers get a 0.25% discount Platinum 0.35% and Platinum honors a 0.50% discount. You can choose from loan terms from 12 to 75 months, but you can only choose either a 48-, 60- or 72- month option online. Once you submit your application, you can contact Bank of America to request a different loan term.

You will need to borrow a minimum of \$5,000 (or \$7,500 if you reside in Minnesota or South Carolina). The vehicle you intend to finance can’t have more than 125,000 miles, be older than 10 calendar years or valued below \$6,000. Once you apply, Bank of America claims you’ll get a response within 60 seconds. If approved, your rate remains valid for up to 30 days.

on Bank Of America’s secure website

### U.S. Bank

U.S. Bank offers loans for new and used vehicles with rates starting at 3.49% APR for online and branch applications. If you are an existing U.S. Bank customer and set up automatic payments from a U.S. Bank consumer checking package account, you’re eligible for a 0.50% rate discount. For used cars, you can only finance a car six years old or newer and with no more than 100,000 miles.

If you intend on purchasing an eco-friendly car, you may be able to save some money by taking advantage of the Green Auto Loan Rate discount. This is only for new or used EPA-certified SmartWay vehicles. These include hybrids or high gas mileage cars. You will get a 0.50% rate reduction once you set up automatic payments from a U.S. Bank package and complete the Green Vehicle Affidavit. You can find out which cars qualify by using the EPA Green Vehicle Guide.

With all loans, you do need to pay an origination fee, which can be anywhere from \$50 to \$125 or up to 1% of the financed amount, depending on your state.

on U.S. Bank’s secure website

### Bottom line

Capital One’s Auto Navigator program is best for those who want a competitive rate on new or used vehicles. For those who have a good credit history and are in a sound financial situation, there’s the added benefit of no prepayment penalties. That way, if you choose to pay off your loan early, you won’t need to pay extra. If you already have a car in mind, Capital One is still a great option to consider, as long as the dealership is on their approved list. With its easy online application process and the ability to tweak the terms of the loan, Capital One offers great terms and rates. However, if you’re not considering buying from an approved dealer, or if you’re looking at commercial or recreational vehicles, you’ll want to look elsewhere.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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# The 6 Best Auto Loans for Buying a Used Car

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Shopping for used cars can be tricky. Not only are you trying to avoid buying a lemon, you are looking for just the right model year, mileage, and price.

While all of these variables can make car shopping stressful, there are a couple of things you can do to simplify the process.

First, decide exactly how much you can afford to spend on a used car. Look at your budget and determine the absolute maximum your monthly payment can be. Also be aware of your total debt payments when compared to your income. Generally speaking, the total of all your debt payments - auto loans, student loans and mortgage - should not exceed 50% of your income. Make sure to factor your auto payment into the calculation.

Next, shop online for the best used-auto loan rates and get pre-approved for the most attractive offer for which you are eligible. In order to strike the best deal possible on your used auto, it is best to walk into the dealership with financing already in hand.

Once you get to the dealership and find the car you want, negotiate the price of the car before telling the salesperson that you are approved for financing.

### How To Apply

When shopping online for a used auto loan, the application process is very similar to that of a brick-and-mortar bank, but more streamlined. In general, be prepared with:

• Vehicle information (if known - required for lenders that do not offer online preapproval) Make, model, mileage, VIN, dealership information.
• Financial Information: employment information, gross income and expenses

### The Best Auto Loans for Used Cars

#### LendingTree

With LendingTree, you can fill out one short online form and see real interest rates and approval information instantly. There are hundreds of lenders on LendingTree ready to compete for your business.

It is important to note that some lenders will do a hard pull on your credit and this is normal within the auto lending space. Keep in mind that multiple hard pulls will only count as one pull, so the best strategy is to have all your hard pulls done at one time.

Disclosure: LendingTree is the parent company of MagnifyMoney.

#### LightStream

LightStream offers auto loans for used cars online with APRs ranging from 3.09% to 7.69%. It’s terms range from 24 to 84 months, it can finance up to \$100,000, and it charges no origination fee. It does offer the ability to obtain preapproval online, before setting foot in a dealership, and if you are approved, you could receive funds into your bank account in as little as 1 business day. The funds can be used on any vehicle, from any dealership, with no restrictions concerning the year, make, model, or mileage of the vehicle you buy.

The 3.09% APR is dependent upon enrolling in AutoPay. If you choose not to enroll in AutoPay, your rate will be 0.50% higher, starting at 3.59%. While rates from LightStream start at 3.09%, they do depend upon the amount financed, and the financing term.

Because LightStream offers no telephone customer support, it offers a guarantee that you will love its service, from start to finish. If you aren’t completely satisfied with your experience, \$100 will be deposited into your account, provided you fill out a questionnaire about your experience within 30 days of closing on your loan.

APPLY NOW Secured

on LightStream’s secure website

#### PenFed

Pentagon Federal (PenFed) Credit Union offers rates as low as 2.99% on used auto loans up to \$100,000. It will finance terms of 36 to 72 months and charges no origination fee. Rates are dependent upon the amount financed, and the terms financed for, as shown in the chart below:

APR as low as*

Term

Loan Amount

Approx.
Loan Pmt.(\$20,000 Loan)

2.99% APR

36 months

\$500 to \$100,000

\$581.54

3.24% APR

48 months

\$7,500 to \$100,000

\$444.81

3.74% APR

60 months

\$10,000 to \$100,000

\$365.99

4.24% APR

72 months

\$15,000 to \$100,000

\$319.03

Rates as of March 1, 2018

Because PenFed is a credit union, you will need to join in order to apply for an auto loan through it, but anyone can join by making a one-time donation to Voices for America’s Troops (\$14) or National Military Family Association (\$15). Also important to note is that even though the loan is entirely online, PenFed does not offer online pre-approval.

In order to apply, you’ll need the following information about the vehicle you will be purchasing:

• Year
• Make
• Model
• Mileage
• VIN
• Dealer or private party information

Once approved, the loan proceeds will go directly to the vehicle’s seller, rather than into your bank account.

APPLY NOW Secured

on PenFed Credit Union’s secure website

#### Capital One

Capital One offers auto loans with rates as low as 3.24% for new vehicles and 3.94% for used vehicles. Their terms range from 36 to 72 months. It can finance up to \$40,000, and has no origination fee. Capital One also offers online preapproval through its Auto Navigator. You can then use the funds at any of 12,000 approved dealers. Proceeds from the loan will be sent directly to the seller, rather than deposited into your bank account.

Rates are dependent upon the financing terms, and subject to credit approval, as seen in the chart below:

Financing Type

36 mos

48 mos

60 mos

72 mos

Purchase New Vehicle

APR as low as

3.24%

3.24%

3.24%

3.24%

Purchase Used Vehicle(Dealer)

APR as low as

4.14%

4.34%

4.34%

4.44%

APPLY NOW Secured

on Capital One’s secure website

#### NEFCU

NEFCU is a credit union offering auto loan for used cars with rates as low as 2.490% for used vehicles. It can finance up to \$70,000 for 12 to 84 months with no origination fee. NEFCU does not offer online preapproval.

NEFCU offers a \$300 coupon offer valid at select dealers on your new or used auto.   You can apply online, at a branch or by telephone by calling 1-800-99-NEFCU. Your rate will be determined by creditworthiness, loan amount, year of the vehicle, and loan term, as per the rate chart.

In order to apply for an auto loan from NEFCU, you must be a member. You are eligible for membership with NEFCU if you:

• Live in Nassau and/or Suffolk Counties
• Work in Nassau and/or Suffolk Counties
• Worship in Nassau and/or Suffolk Counties
• Attend school in Nassau and/or Suffolk Counties
• Regularly conduct business in Nassau and/or Suffolk Counties
• Family Sponsorship - An existing NEFCU member can sponsor in an immediate family member (mother/father, brother/sister, child, grandparent or grandchild) or any household member
• Membership is not open to individuals who live, work, worship, attend school and do business exclusively in East Hampton, Southampton and Shelter Island.

### Navy Federal Credit Union

Navy Federal Credit Union offers auto loans for used cars with rates as low as 2.29% with terms of 12 to 96 months. It can loan up to \$100,000 and charges no origination fee. Navy Federal Credit Union does offer online preapproval.

Rates from Navy Federal Credit Union are determined by the car’s model year, as well as the loan term, as seen in the chart below:

Auto Loan Rates

As of: March 1, 2018, 1:00 AM EST

Loan Type

up to 36 mos.
APR as low as*

37-60 mos.
APR as low as*

61-72 mos.
APR as low as*

73-84 mos.
APR as low as*

85-96 mos.
APR as low as*

New Vehicle

2.29%

2.69%

2.99%

4.39%

5.29%

Late Model Used Vehicle

2.29%

2.99%

3.79%

Used Vehicle

3.99%

4.29%

5.59%

In the rate chart, new vehicles are year models 2016, 2017, and 2018 with 7,499 miles or less, and the minimum loan amount is \$30,000 for terms 85-96 months. Late model used vehicles are described as 2016, 2017, or 2018 models with 7,500 - 30,000 miles. Used vehicles are vehicles (up to 20 years old) with 30,001 miles or more.

In order to apply for an auto loan from Navy Federal Credit Union, you must become a member. You are eligible if you are Active Duty Army, Navy, Marines, Air Force, Coast Guard, Army or Air National Guard, a member of the Delayed Entry Program, a Department of Defense (DoD) Officer Candidate/ROTC, a DoD Reservist, or a retiree from any of these service branches. You are also eligible as a civilian if you are a DoD civilian employee, a U.S. government employee assigned to a DoD installation, a DoD contractor, or a DoD retiree. Finally, if you are the immediate family member of anyone eligible to join, you are also eligible to become a member.

After loan approval, the proceeds will be sent directly to the dealership, rather than deposited into your bank account.

### You Should Shop Around

Often concerns arise about the effect of shopping around for auto loans on your credit score. However, all inquiries within a 30-day period count as one inquiry on your credit report, so as long as your shop used auto loan rates within a 30-day period, those inquiries will only have a minimal impact on your credit score

Check other auto loan offers here.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Gretchen Lindow |

Gretchen Lindow is a writer at MagnifyMoney. You can email Gretchen at gretchen@magnifymoney.com

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# The 6 Best Auto Loans for Buying a Used Car

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

## Save time & money at the dealership by getting pre-approved for your car loan today!

Compare auto financing offers

Shopping for used cars can be tricky. Not only are you trying to avoid buying a lemon, you are looking for just the right model year, mileage, and price.

While all of these variables can make car shopping stressful, there are a couple of things you can do to simplify the process.

First, decide exactly how much you can afford to spend on a used car. Look at your budget and determine the absolute maximum your monthly payment can be. Also be aware of your total debt payments when compared to your income. Generally speaking, the total of all your debt payments - auto loans, student loans and mortgage - should not exceed 50% of your income. Make sure to factor your auto payment into the calculation.

Next, shop online for the best used-auto loan rates and get pre-approved for the most attractive offer for which you are eligible. In order to strike the best deal possible on your used auto, it is best to walk into the dealership with financing already in hand.

Once you get to the dealership and find the car you want, negotiate the price of the car before telling the salesperson that you are approved for financing.

### How To Apply

When shopping online for a used auto loan, the application process is very similar to that of a brick-and-mortar bank, but more streamlined. In general, be prepared with:

• Vehicle information (if known - required for lenders that do not offer online preapproval) Make, model, mileage, VIN, dealership information.
• Financial Information: employment information, gross income and expenses

### The Best Auto Loans for Used Cars

#### LendingTree

With LendingTree, you can fill out one short online form and see real interest rates and approval information instantly. There are hundreds of lenders on LendingTree ready to compete for your business.

It is important to note that some lenders will do a hard pull on your credit and this is normal within the auto lending space. Keep in mind that multiple hard pulls will only count as one pull, so the best strategy is to have all your hard pulls done at one time.

Disclosure: LendingTree is the parent company of MagnifyMoney.

#### LightStream

LightStream offers auto loans for used cars online with APRs ranging from 3.09% to 7.69%. It’s terms range from 24 to 84 months, it can finance up to \$100,000, and it charges no origination fee. It does offer the ability to obtain preapproval online, before setting foot in a dealership, and if you are approved, you could receive funds into your bank account in as little as 1 business day. The funds can be used on any vehicle, from any dealership, with no restrictions concerning the year, make, model, or mileage of the vehicle you buy.

The 3.09% APR is dependent upon enrolling in AutoPay. If you choose not to enroll in AutoPay, your rate will be 0.50% higher, starting at 3.59%. While rates from LightStream start at 3.09%, they do depend upon the amount financed, and the financing term.

Because LightStream offers no telephone customer support, it offers a guarantee that you will love its service, from start to finish. If you aren’t completely satisfied with your experience, \$100 will be deposited into your account, provided you fill out a questionnaire about your experience within 30 days of closing on your loan.

APPLY NOW Secured

on LightStream’s secure website

#### PenFed

Pentagon Federal (PenFed) Credit Union offers rates as low as 2.99% on used auto loans up to \$100,000. It will finance terms of 36 to 72 months and charges no origination fee. Rates are dependent upon the amount financed, and the terms financed for, as shown in the chart below:

APR as low as*

Term

Loan Amount

Approx.
Loan Pmt.(\$20,000 Loan)

2.99% APR

36 months

\$500 to \$100,000

\$581.54

3.24% APR

48 months

\$7,500 to \$100,000

\$444.81

3.74% APR

60 months

\$10,000 to \$100,000

\$365.99

4.24% APR

72 months

\$15,000 to \$100,000

\$319.03

Rates as of March 1, 2018

Because PenFed is a credit union, you will need to join in order to apply for an auto loan through it, but anyone can join by making a one-time donation to Voices for America’s Troops (\$14) or National Military Family Association (\$15). Also important to note is that even though the loan is entirely online, PenFed does not offer online pre-approval.

In order to apply, you’ll need the following information about the vehicle you will be purchasing:

• Year
• Make
• Model
• Mileage
• VIN
• Dealer or private party information

Once approved, the loan proceeds will go directly to the vehicle’s seller, rather than into your bank account.

APPLY NOW Secured

on PenFed Credit Union’s secure website

#### Capital One

Capital One offers auto loans with rates as low as 3.24% for new vehicles and 4.14% for used vehicles. Their terms range from 36 to 72 months. It can finance up to \$40,000, and has no origination fee. Capital One also offers online preapproval through its Auto Navigator. You can then use the funds at any of 12,000 approved dealers. Proceeds from the loan will be sent directly to the seller, rather than deposited into your bank account.

Rates are dependent upon the financing terms, and subject to credit approval, as seen in the chart below:

Financing Type

36 mos

48 mos

60 mos

72 mos

Purchase New Vehicle

APR as low as

3.24%

3.24%

3.24%

3.24%

Purchase Used Vehicle(Dealer)

APR as low as

4.14%

4.34%

4.34%

4.44%

APPLY NOW Secured

on Capital One’s secure website

#### NEFCU

NEFCU is a credit union offering auto loan for used cars with rates as low as 2.490% for used vehicles. It can finance up to \$70,000 for 12 to 84 months with no origination fee. NEFCU does not offer online preapproval.

NEFCU offers a \$300 coupon offer valid at select dealers on your new or used auto.   You can apply online, at a branch or by telephone by calling 1-800-99-NEFCU. Your rate will be determined by creditworthiness, loan amount, year of the vehicle, and loan term, as per the rate chart.

In order to apply for an auto loan from NEFCU, you must be a member. You are eligible for membership with NEFCU if you:

• Live in Nassau and/or Suffolk Counties
• Work in Nassau and/or Suffolk Counties
• Worship in Nassau and/or Suffolk Counties
• Attend school in Nassau and/or Suffolk Counties
• Regularly conduct business in Nassau and/or Suffolk Counties
• Family Sponsorship - An existing NEFCU member can sponsor in an immediate family member (mother/father, brother/sister, child, grandparent or grandchild) or any household member
• Membership is not open to individuals who live, work, worship, attend school and do business exclusively in East Hampton, Southampton and Shelter Island.

### Navy Federal Credit Union

Navy Federal Credit Union offers auto loans for used cars with rates as low as 2.29% with terms of 12 to 96 months. It can loan up to \$100,000 and charges no origination fee. Navy Federal Credit Union does offer online preapproval.

Rates from Navy Federal Credit Union are determined by the car’s model year, as well as the loan term, as seen in the chart below:

Auto Loan Rates

As of: March 1, 2018, 1:00 AM EST

Loan Type

up to 36 mos.
APR as low as*

37-60 mos.
APR as low as*

61-72 mos.
APR as low as*

73-84 mos.
APR as low as*

85-96 mos.
APR as low as*

New Vehicle

2.29%

2.69%

2.99%

4.39%

5.29%

Late Model Used Vehicle

2.29%

2.99%

3.79%

Used Vehicle

3.99%

4.29%

5.59%

In the rate chart, new vehicles are year models 2016, 2017, and 2018 with 7,499 miles or less, and the minimum loan amount is \$30,000 for terms 85-96 months. Late model used vehicles are described as 2016, 2017, or 2018 models with 7,500 - 30,000 miles. Used vehicles are vehicles (up to 20 years old) with 30,001 miles or more.

In order to apply for an auto loan from Navy Federal Credit Union, you must become a member. You are eligible if you are Active Duty Army, Navy, Marines, Air Force, Coast Guard, Army or Air National Guard, a member of the Delayed Entry Program, a Department of Defense (DoD) Officer Candidate/ROTC, a DoD Reservist, or a retiree from any of these service branches. You are also eligible as a civilian if you are a DoD civilian employee, a U.S. government employee assigned to a DoD installation, a DoD contractor, or a DoD retiree. Finally, if you are the immediate family member of anyone eligible to join, you are also eligible to become a member.

After loan approval, the proceeds will be sent directly to the dealership, rather than deposited into your bank account.

### You Should Shop Around

Often concerns arise about the effect of shopping around for auto loans on your credit score. However, all inquiries within a 30-day period count as one inquiry on your credit report, so as long as your shop used auto loan rates within a 30-day period, those inquiries will only have a minimal impact on your credit score

Check other auto loan offers here.

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Gretchen Lindow is a writer at MagnifyMoney. You can email Gretchen at gretchen@magnifymoney.com

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# 5 Reasons to Ditch Your Car in 2018

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Rising gas prices and car insurance premiums could make owning a car more costly in 2018 than the previous year. But there are also more alternatives for getting around as ride-sharing and car rental options challenge traditional methods of transportation.

If you’re wavering between owning a car or not, or selling your family’s second vehicle, these five reasons may sway you to ditch your auto in 2018.

## 1. Higher prices at the pump

The 2018 American gas bill may eclipse 2017’s total by \$25 billion, according to GasBuddy, a website and app that tracks and analyzes gas prices in real time. The total gas bill is expected to reach \$364.6 billion in 2018, with average household spending \$1,765 on gasoline during the year, compared with \$1,898 in 2017, GasBuddy projects.

While several factors affect the price at the pump, volatility is a constant concern in the event of major storms or other natural disasters. Policy, demand, inventory and state tax regulations also affect prices, says Dan McTeague, GasBuddy’s senior petroleum analyst.

“It is going to be a much more expensive year for Americans,” he said.

In January, average gas prices in the U.S. reached \$2.54 per gallon, exceeding GasBuddy’s expectations of a high of \$2.53 for the month. The increase in prices will become more noticeable, especially during the driving season, which is April to September, McTeague says.

## 2. Climbing car insurance premiums

The consumer price index for motor vehicle insurance increased 7.9% in 2017, on top of a  7% increase in 2016, according to January 2018 data from the U.S. Bureau of Labor Statistics.

Car insurance premiums are expected to continue rising. Increases were as high as 15.3% from 2015 to 2016, according to a 2017 analysis by financial site ValuePenguin, using data from SNL Financial.

Companies haven’t been able to close the gap in a large part due to covering damages after natural disasters and the steady climb in collision rates, which has been growing since 2011, Rieman says.

So, the safer drivers with clean records are paying higher premiums, even though they may not have made a claim.

## 3. Ride-sharing revving up

The ride-sharing industry has dramatically shifted in the past 10 years as services like Lyft and Uber make it easier to get around without owning a car. You can grab a ride when you need it, and even though there’s a cost, you don’t have to worry about the monthly payments, gas, insurance or repair expenses that come with owning a car.

Also, you can pay using pretax commuter benefits, which are provided by some employers to use for transit and biking, Uber Pool or Lyft Line rides.

And you can feel good knowing you’re helping the environment.

A 2017 study published in the Proceedings of the National Academy of Sciences examined the ride-share industry using New York City taxi data. The algorithm used showed carpooling options can reduce the number of cars on the road, as well as a reduction in wait time of only 2.8 minutes in New York City.

Ride-sharing appears to have sobered up the numbers of drunk driving accidents, too. For example, prior to Uber’s entry in Seattle, 2,750 people were arrested per year for driving under the influence. The company reported in 2015 that its “entry into the Emerald City was associated with a 10% decrease in DUI arrests.”

## 4. Short-term rentals are on the rise

Giving up a car may seem like you are losing your freedom. But you can take the step, knowing that short-term rental is an option, whether you suddenly need a vehicle to get around town or want to take a road trip.

Short-term rental options challenge ownership and rental methods because you can pay as you go.

Customers can rent cars for short periods of time, such as by the hour or minute, from collection points generally within cities, according to the Rethinking Mobility report.

Zipcar, a subsidiary of Avis Budget Group, has a fleet of 12,000 cars in 10 countries in over 500 cities. Users, which include travelers who need to make that last leg to the hotel and locals on a weekend road trip, can rent wheels of any kind for as little as 30 minutes. The first 180 miles and gas are included, then 45 cents is tagged to each additional mile. Cars are available 24 hours a day.

This kind of car rental service is based on a European system as a sustainable solution to problems like congestion and pollution, the company says.

“Most members use Zipcar as an alternative to owning a car and want the freedom of access to a car without the hassles of owning a car, like finding parking and paying for gas and maintenance,” said Katelyn Chesley, a Zipcar spokeswoman.

Reservations last between 30 minutes and 14 days with hourly, monthly, daily and yearly rates, depending on the frequency of use.

Another option is peer-to-peer car share models, like Airbnb for vehicles. Choices include Turo and Getaround, where you can rent a car from an owner without going through a traditional service. The idea is that car owners put their idle car to use and renters have options without committing to a car full time.

## 5. Walking and cycling can lead to healthier, happier lives.

Major metropolitan areas across the U.S. are finding ways to discourage sprawl and offer convenience for people to travel via rail, bike or foot. The Atlanta Beltline, for example, is a major project using 22 miles of a former railway corridor to link neighborhoods and give people options for biking and walking to work, shopping and other activities.

The most walkable places have a higher educated workforce and higher social equity, according to a 2016 study by the George Washington University School of Business.

A study conducted by university researchers in the U.K. found that commuting by cycling and walking lowered the risk of cardiovascular disease. “Initiatives to encourage and support active commuting could reduce risk of death and the burden of important chronic conditions,” according to the 2017 study.

Walking could make you happier before and after work, too. Another U.K. study found that people who started walking or cycling for their commute instead of driving improved their overall well-being. Specifically, those commuters didn’t feel as much strain as those who drove and were better able to concentrate, according to the 2014 study by researchers at the University of East Anglia and the Centre for Diet and Activity Research in England. The report analyzed 18 years of data on nearly 18,000 commuters in Britain by looking at psychological health factors, such as unhappiness.

The relationship between rail transit and walkable urban places is strong, with 65% of the walkable urban places served by rail transit service, according to a 2016 report by the Brookings Institution, a Washington, D.C.-based nonprofit public policy organization.

“So many towns have the structure in place to be walkable,” said Rachel Quednau, communications director at Strong Towns, a national nonprofit that provides resources for towns and cities to create walkability options.

“Some of the biggest changes and simplest are to begin narrowing streets and roads so they’re more walkable, cars drive slower and it’s safer to walk,” she said.

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# How to Buy a Car Online — from Start to Finish

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Walking onto a car dealership lot can sometimes feel like an experience straight out of a horror movie. Before you’ve even made it a few feet, car salesmen descend upon you like vultures, urging you to make spur-of-the-moment decisions that can bury you in debt up to your eyeballs for the next half-decade.

There has to be a better way. According to a 2015 survey by the research firm Accenture, 53% of people “would consider buying a car online.” And, according to the firm, 16% of people already have.

Buying a car online can be a much smoother experience and lead to better, more well-informed outcomes. But, it does require a bit more legwork on your part (at least digitally). In this guide, we’ll walk you through how the online car buying experience compares with the traditional route and the exact steps you need to know to buy a car online. Finally, we’ll show you what to watch out for to stay safe.

Following the steps in this guide can help ensure that you don’t get taken for a ride when buying your next car online.

Before the internet revolutionized everything, there really was only one way most people bought a car. They’d visit car lots, find a car they liked, and then sit down with a car salesman to work out an agreement. This lead to the dreaded negotiation process.

“There's all this back-and-forth and, 'Oh, I've got to go talk to my manager,’” said Jack Gillis, director of public affairs at the Consumer Federation of America and author of “The Car Book.” “Well, the guy goes back and has a cup of coffee and lets you sit there and steam for a while, then he comes back and gives you some song and dance about why they can or can't do something.”

Because most people treated car dealerships as a one-stop shop for buying a car, they often wouldn’t be informed about the full range of available cars, financing options or trade-in options available to them. Without these bargaining chips, consumers are at the mercy of the car salesmen.

“It's like a lamb being led to slaughter,” said Gillis.

What if someone could wave a magic wand and take away all those painful points? With online car buying, it’s possible to complete nearly every phase of the car-buying experience — from finding the right car to negotiation — entirely online.

In this guide, we’ll talk about the pros and cons of buying a car online and how it compares to traditional car buying.

While removing the painful points of dealing with hawkish car salesmen is certainly nice (especially for introverted folks who have a fear of negotiating), perhaps the biggest benefit of buying a car online is that it puts you in control of the car-buying process.

You’re no longer at the mercy of the salesmen at one dealership. You can expand your options for cars, financing and trade-ins, and use these as bargaining chips to negotiate for the best price possible.

“The whole digital part really is empowering for the buyer because there's so much information that you can use to make an informed decision,” said Matt DeLorenzo, managing editor of KelleyBlueBook.com.

The downside of all this power is that it requires a bit more digital legwork on your part to bring all the pieces together. But, as we’ll see, it’s not rocket science. Doing your homework can literally save you thousands of dollars and ensure you get the best car possible.

### Step 1. Choose the right car

It’s important to choose a type of car that will fit your needs best. Do you want a very fuel-efficient vehicle for short commutes? How about hauling large amounts of cargo around? Do you have a large family, or a small one? Questions like these can help you zero in on what kind of body style (truck? SUV? compact car?) will suit your needs best.

Once you narrow down a body style, it’s time to research what specific makes and models of cars might be best for you. Consumer Reports offers comprehensive reviews of cars by make, model and year, however, it does charge a small monthly or annual fee. Other good websites to do research on specific types of cars include Edmunds, Car and Driver and Kelley Blue Book.

If you’re buying a new car, you might be offered certain options and add-ons from the dealer, such as VIN window etching or rust-proofing. Before you go signing up for every option offered (and sign away your whole paycheck in the process), it’s important to research these options.

According to a 2017 report from the National Consumer Law Center, the average markup on these add-ons is 170%. If you really do need these optional add-ons (and you probably don’t), perhaps it’s better to get it done yourself.

### Step 2. Determine the price you want to pay

Next up is determining how much car you can actually afford. A good rule of thumb is the 20/4/10 rule:

• 20: Make a minimum 20% down payment.
• 4: Finance for no more than four years.
• 10: Monthly transportation expenses shouldn’t exceed 10% of your monthly income (including insurance, gas, car payments, etc,)

This rule of thumb will help you set a cap on your car-shopping budget. For example, if you have \$3,000 saved, it might be a good idea to avoid buying a car for more than \$15,000 (\$15,000 * 0.20 down= \$3,000). From there, you can assess any financing offers to make sure that you’re not spending more than 10% of your income on the car, and that your financing doesn’t stretch out past the four-year mark.

You can narrow your car search down even further using these budget caps. If you know that the MSRP of a particular new car is far outside of your budget, you can weed it out of consideration. You can use websites like Kelley Blue Book or the National Automobile Dealers Association to research the current prices for new and used cars in your area.

### Step 3. Get approved for financing online

Traditionally, you’d walk into a dealership and tell the car salesman your monthly budget. Then, the car salesman would work out the final purchase price and the financing to give you one, final monthly payment number.

According to Gillis, this is one of the surest ways to pay more in the long run.

“The dealer will ask, 'Listen, what if I can get you out the door for \$325 a month?’ [but] you have no idea what you're really paying for financing,” he said. “You may be getting into a financial arrangement that is more expensive than if you had shopped around.”

That’s why it’s especially important to get preapproved for an auto loan before you actually go shopping. Getting preapproved for a loan does not mean you have to take the financing; rather, it helps you stay within your budget and gives you a bargaining chip in negotiations.

You can easily get preapproved for an auto loan online through websites like LendingTree, which is the parent company of MagnifyMoney. Using our auto loan marketplace, you can fill out one short online form and potentially get offers from several auto lenders at once. It’s also a good idea to check around with local banks and credit unions, which may offer deals to you locally.

You’ll generally need a high credit score to qualify for the best auto financing offers that banks love to advertise. If you don’t have a high credit score, you will still often be preapproved for the loan, however, it may come with higher interest rates. If you’re outright denied for a preapproved loan, you may need to consider shopping elsewhere or waiting a little while so you can take steps to increase your credit score.

If you are qualified for pre-approval, the lender will give you a pre-approval letter. Make sure to keep a copy of this letter, and bring it with you to the table when it comes time to negotiate a price on the car you’ve chosen.

### Step 4. Choose the right source

It’s now time to cast your net and see what cars are out there.

AutoTempest is a comprehensive website that proclaims to be the Kayak.com of cars: it searches several websites for specific makes and models, including on Craigslist. If you’re looking for one particular brand, don’t overlook your local dealership’s website. Other possible websites to scope out cars include:

Luckily, with the power of the internet, the whole world (or at least the whole country) can be your virtual car lot. If you’re able to travel to pick up your new vehicle, you might be able to save a trunkful of cash by broadening your search.

For example, if you live in a snowy climate and are looking for an all-wheel drive car, you might try looking in a warmer area. “There might be better incentives on all-wheel drive cars in, say, Arizona than in the Northeast where they got a lot of snow,” said DeLorenzo.

### Step 5. Get quotes

Once you’ve identified your targets, the next step is to find out how much they’ll cost. You’ll negotiate the price lower in the next step, but this just sets a starting point.

Oftentimes, dealerships or third-party sellers won’t show you the price of a vehicle online as the price may have changed or the vehicle may have already been sold. That’s why it’s important to contact the dealership directly and ask for a quote for each vehicle you’re interested in.

Email or call the dealership and ask for their internet sales manager: this is the person you’ll be working with through the negotiation process. Give them the VIN or the stock number of the vehicle you’re interested in and ask for a quote. Then, ask them to email it to you so you have it in writing.

It can sometimes be difficult to get a dealership to quote a price. Dealerships may say, “'Oh, I see you're shopping online, boy that's great. Here's what I want you to do. I want you to go and talk to all the other dealers, and then come back to me, and I'll see what I can do for you.'” said Gillis. “Your response to that is, 'No, I'm not gonna do that. I want you to give me the very best price you can give me for this make, model, year, and I want you to commit to that.'”

If quote collecting isn’t your thing, you can also hire a service such as CarBargains. For \$250 and a detailed description of what you’re looking for, CarBargains staff will collect at least five different dealership quotes for you. According to Gillis, “statistically, about a third of the results actually come in at below so-called manufacturer’s price or inventory price.”

Collecting these quotes gives you the bargaining power you need to negotiate prices as low as possible in the next step.

### Step 6. Time to negotiate

Ah, the dreaded negotiation. Since you’ve already gone through all the steps to be an informed consumer, it will be a much smoother process. Specifically, you’ll be negotiating the price of three separate items:

Vehicle price; financing cost; and trade-in value.

### Vehicle price

This is the most important piece. You can — and should — play the offers you’ve received in the prior step off of each other. Did someone offer \$12,500? Show that emailed quote to another dealer and ask if they can lower their price to \$12,000.

Car dealerships are usually very easy to negotiate with online.

“If you think about it from an efficiency point of view, an online salesperson can be working more deals at one time than somebody on the floor who's physically with one person,” said DeLorenzo. “Sometimes it's actually more cost-effective for the dealer to sell it through or do a lot of the negotiation online.”

Car salesmen will often try and upsell you on add-ons when negotiating the price for a car. “They may say, ‘Well this will only cost you 10 bucks more a month.’ Well, yeah, and that's \$120 over a year. Over five years that's \$600, \$700. You can't let bells and whistles cloud your judgment,” said DeLorenzo. Stick to the basic numbers and don’t get distracted.

Chances are that you already have a car you’re looking to trade in and help defray the cost a bit. Most dealerships will accept trade-ins, but be warned: you will probably get much, much less than if you shop around for trade-in prices on your own.

Tools such as Kelley Blue Book also allow you to find out a fair trade-in price for your vehicle. In addition, you can use a tool on their website called “Instant Cash Offer” to get bids from dealers on your car.

“The beauty of having something like that is that it sets a floor for what your car is worth,” said DeLorenzo. “You'll know you'll get at least that much in trade or in an outright purchase, and that's important leverage to have when you're negotiating a new car deal.”

Additionally, you can try selling your car yourself through websites like Craigslist. Generally, going this route will net you the best price for your old car, although this may take much more time and energy than simply driving onto a car lot with your old car and driving off with a new one.

### Financing cost

The final piece of the puzzle is how you’re going to pay for your new car. Since you’ve already taken the time to be preapproved for an auto loan, this step is simple. Show the dealer your pre-approval letter and ask them if they can beat it.

If so, great. If not, then you know you’ve already secured the best auto financing deal possible.

### Step 7. Making the final purchase online

Once you’ve lined up the three pieces of the puzzle — the lowest car price, the lowest financing price and the highest trade-in value — it’s time to make your decision.

Most dealerships still require you to physically come in to complete the final paperwork signing. However, that’s beginning to change.

“Savvy dealers are beginning to digitize as much of that kind of paperwork [as possible], to just make it easier to buy a car from them,” said DeLorenzo.

“It works out better for them, too. I mean, if they're able to get you in and out quicker, they can sell more cars quicker. People have a much more positive view of how the deal went and it's just good business.”

But as far as completing the entire purchase process online? DeLorenzo said, “I think there are dealers who are willing to do that. The question is, do you want to do that?”

But for now, we still can’t entirely get around some of the physical in-person aspects of buying a car. Perhaps someone will invent a virtual test-drive machine in the future.

## Staying safe while shopping for cars online

Luckily, outright scams aren’t too common when it comes to buying cars online, according to Gillis. Many car dealers are subject to consumer-friendly regulation by the Federal Trade Commission.

### Beware the bait-and-switch

One situation that Gillis has seen, however, involves a bait-and-switch technique after consumers arrive at the dealership to complete the purchase after negotiating everything online.

Here’s how he describes this common ploy: “You've got it all squared away. You get to the dealership to close the deal, and all of a sudden, 'Oh my gosh. I can't believe it, someone just came in and bought that car, but we have another one here that actually has a few better features on it, and it's just the color you wanted, and it's only gonna cost you \$20 more per month.’”

If this happens to you, be prepared to walk away from the dealership — they’re just trying to weasel more money out of you.

While stories like that may be uncommon, there are a couple of things you can do to make sure that you don’t end up regretting your decision.

### Get an inspection from an independent mechanic

If you’re buying a used car, whether at a dealer or from someone you found on Craigslist, you should absolutely get an inspection first. Everyone has heard horror stories about buying a lemon (or worse, been the person who bought the faulty car). The seller will surely tell you that the car is in perfect shape, but how do you really know? Getting an auto inspection by an independent mechanic is perhaps one of the best ways to protect yourself.

If you’re unable to take the car to your own mechanic, DeLorenzo recommends a great service from AiM Certify. For as little as \$129, you can book an independent mechanic anywhere in the country to travel to the dealership and perform an inspection for you. You’ll get back a full mechanical report complete with actual photos of the car (not gorgeous stock images that seem to plague dealership websites).

“Most of the problems that consumers end up not liking about their vehicles could have determined in a test drive,” said Gillis. “For example, it's hard to park, or the back seat really isn't that comfortable, or the trunk really doesn't hold that much, or ‘when I'm changing lanes, there's a big blind spot in the back.’ So that's why that test drive is really, really important.”

If you’re not happy with your choice, you may have wasted tens of thousands of dollars. “It's not like buying a pair of shoes from Amazon,” said DeLorenzo. “It gets a little bit more involved if the car doesn't fit you and you try to send that back.”

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

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Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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# How to Finally Pay Off Your Car This Year

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

A car is the second-most expensive thing most of us will ever buy. And it’s getting pricier: The average loan amount for a new vehicle is \$30,621 and U.S. residents owe more than \$1 trillion in car debt, according to Experian’s 2017 “State of the Automotive Finance Market” report.

We’re also getting deeper into auto debt over longer periods of time. The number of people borrowing longer-term loans (73 to 84 months) increased by 10% since the previous year’s report. Not only do these extended loans mean more interest paid, they also eat up consumer income for too long.

“You can handle \$400 a month today, but what happens if you lose your job or have to move?” said Sonya Smith-Valentine, a former consumer protection lawyer and accountant who now offers financial wellness training in the Washington, D.C. area.

“Seven years is too much time to be tied into a car loan.”

The obvious alternative to getting stuck with a big auto loan is to pay cash, but not everyone can afford that. Another option is to buy a reliable used car or a less-expensive new car, and finance those loans for shorter periods.

“The more that you end up paying in interest, the less you have in cash flow over your life. That cash flow is what’s going to build your wealth,” said Tara Falcone, a certified financial planner in Princeton, N.J. “If you’re in your 20s or 30s, that (interest) invested over time could be a significant amount of money in the future, when you need it to live off.”

## How to finally pay off your auto loan

Paying a loan off early may sound impossible to those whose budgets already feel tight. The following information can reveal options you didn’t know you had.

To make an early payoff game plan, you need to know:

• The term of your loan and its interest rate
• Whether the loan agreement includes a prepayment penalty
• How much you still owe (call the lender for this)
• The current value of your vehicle (find it on sites like Kelley Blue Book)
• Your credit score, which will greatly impact your ability to qualify for a loan with better terms

From there, there are a few ways to manage your loan:

### Option 1: Refinancing

If you’re stuck with a high-interest auto loan, you might consider refinancing for a new auto loan with better terms. Banks, credit unions and online financial institutions may be able to get you a new loan with terms more favorable than the original one.

Ideally, the new loan term will be shorter than the current one. The point is to pay off the car note as quickly as possible, in order to pay as little interest as possible.

Depending on your original rate, however, a longer-term loan might still mean less interest paid overall. Falcone knows of a Navy enlistee who financed a car at a dealer for a whopping 24%. Fortunately, she was able to refinance at 7%.

Run your own numbers through an auto loan refinance calculator like this one from LendingTree, the parent company of MagnifyMoney. If your original agreement includes a prepayment penalty or if the new loan would carry an origination fee, you’ll need to factor those into your calculation as well.

If you can refinance at a lower interest rate, early payoff will become easier.

### Option 2: The rapid repayment route

The faster you retire a loan, the less interest you’ll pay. One simple tactic to pay off a loan quickly is to make biweekly payments instead of monthly payments.

If you owe \$430 per month, for example, you’d make half that payment every two weeks. Paying \$215 every other week (or 26 times per year) rather than the full amount 12 times a year would add up to \$5,590 instead of \$5,160.

You could also continue to make monthly payments, but pay more than the required amount. An easy way to start is by rounding up. For example, if you owe \$389 per month, you could make the payment \$400 (or more, if you can).

Where to find the extra money? These tactics can help:

Sell stuff. A game system, designer purse, mountain bike or other rarely used items could bring in decent dollars through eBay, Craigslist or consignment websites.

Write down what you spend. Small, unnoticed expenses can add up fast, says Brian Hanks, a certified financial planner who practices in Salt Lake City. He advises clients to keep track of all expenditures for a month (on paper or with an app). Often, they’re startled to discover how much the things they “don’t get real value out of” are costing them each month – money that could be applied to their loans.

“Once they realize it, behavior can change,” said Hanks.

Get a side hustle. Petsitting, driving for Lyft, a weekend waitressing gig – whatever fits your ability and personality. Or use your professional skill set to become a consultant, looking for work you can do on weekends.

Contribute windfalls. You got a tax refund. Grandma sent you \$50 for your birthday. Vacationing neighbors paid you to pick up their mail. Any time additional money shows up, throw it toward your payment.

Ask for a loan. A relative or friend might be willing to help. Draw up an agreement specifying how you’ll repay (weekly? monthly? by cash, check or PayPal?) and then keep to the terms.

Spending freeze. Colorado-based certified financial planner Dan Andrews suggests clients drop one expensive habit (shopping, eating meals out) for 30 days.

“Prove that you have the savings gusto in you for a month,” he said. Then, put the money saved toward the next payment. Often, the spending freeze “reframes what they thought was a ‘need’ into a ‘want,’” said Andrews, who specializes in working with millennials. This means more money for the loan every month.

Before you start making extra payments, talk to the lender. You need to make absolutely sure that the additional money goes against the principal of the loan.

### Option 3: Selling and starting over

Want to get out from under a loan entirely? Let someone else pay it off.

Compare the Kelley Blue Book value to the amount you still owe. If there’s a positive balance – say, you owe \$10,000 and it’s worth \$11,000 – then put the car up for sale.

Once you have a buyer, ask the lender for the payoff amount: What it will take to pay in full and get the vehicle’s lien released. Smith-Valentine suggests creating a written agreement stating that the third-party buyer will pay the lender directly, and you will sign over the title once you receive it.

You’ll want to have another mode of transportation lined up, of course. Having to carpool or take public transit for a while might be preferable to being deeply in debt. Continue to make your “car payment,” though: Set aside that amount every month for a replacement vehicle. Figure out what you’re not paying for car insurance and add to the car fund, too.

If the agreed-upon sale price doesn’t cover the payoff amount, be prepared to make up the difference. Should you be lucky enough to sell the car for more than it’s worth, use the balance as seed money for a replacement car.

A word of caution about auto trade-ins: You may have seen ads for auto dealers who offer to pay off your previous loan if you’ll trade in the vehicle for a new one. The Federal Trade Commission advises consumers to be cautious about such deals, especially if they have negative equity (aka they’re “underwater” on their loans).

Some of those dealers find ways to include the money owed that in the new agreement – which means you would be financing that negative equity along with the cost of the replacement vehicle. Read the contract very carefully, and ask for an explanation of how any negative equity was handled.

### What if you’re underwater on your auto loan?

Owing more than a vehicle is worth makes it tougher to sell but not necessarily impossible.

If you have savings, make up the difference between what a buyer will pay for the car and what will be left on the auto loan afterward. No ready cash? Look into taking out a small personal loan to pay off the remaining balance. It may be better to owe some money than to be stuck with a large loan for a vehicle that continues to depreciate.

Another possibility: Make extra payments against the principal until the loan balance matches the car’s value, and then put it up for sale. Before you do, check to see if at that point you’ll be eligible for refinancing at a better rate – if you want to keep the car, that is – and if you’ll be able to swing the lower payments.

#### Should you give back the car?

Suppose you’re underwater, can’t refinance, have no savings and are disgusted with the thought of making payments for years. It can be tempting to just give the car back to the dealer.

Don’t do it. A “voluntary repossession” reduces costs only for the creditor, and will hurt you in the long run.

The now-used car will probably sell for less than the loan balance, and you are required to pay the difference. For example, if you still owe \$12,000 and the vehicle sells for \$9,000, then you’ll have to come up with the “deficiency” of \$3,000. You’ll also be on the hook for other funds, such as fees associated with the repossession, including storage and legal fees.

The lender can sue you for a “deficiency judgment,” which shows up on your credit report. If the account gets turned over to a collections agency, you’ll be hounded nonstop – and the judgment will remain on your credit report until it’s paid. The repossession will also stay on your report for up to seven years, which wreaks havoc on your credit score.

Instead of giving the car back, use the rapid repayment tactics noted above to bring the loan balance closer to the vehicle’s current value. At that point, try selling or refinancing. If you’re financially stressed, Smith-Valentine suggests a longer finance term in order to get a lower monthly payment. That will mean more interest in the long run, but will give you some breathing room right now.

“I’m not a proponent of long car loans. But that’s still better than a repossession,” she said.

### Bottom line

Ideally, you’ll be able to pay off your loan quickly, or at least refinance it at a more favorable rate that allows you to put more money toward the principal balance.

Imagine not having a car payment. What could that extra few hundred dollars a month do for the bottom line? Make this the year that it happens.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Donna Freedman |

Donna Freedman is a writer at MagnifyMoney. You can email Donna here

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# What to Do if You’re Trapped in a Bad Auto Loan

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Sometimes, you don’t realize you sign a bad deal until you start having to pay for it.

Imagine this scenario: When you walked away from the auto dealer’s lot, you were excited. You had a brand spanking new — or new to you — vehicle. After the hassle of saving for, finding, and finally purchasing your dream car, your financing terms were likely the last thing on your mind. When the dealer sat you down and told you what your monthly payment would be, you did some mental math, figured you could afford the bill, and signed the dotted line. A few months later, you notice your loan could have been less expensive and feel cheated.

What do you do?

“If it's in the contract and you signed the contract that’s it. You’re stuck with that,” said Anthony Giorgianni, associate editor at Consumer Reports.

If you’re not sure about your financing deal, a good way to evaluate it is by taking a look at the amortization table in the contract you signed, said Jerry Buchko, a Minneapolis-based debt counselor. If you can’t locate the original contract, you can ask for one via email or look for one online and estimate, but it’s most ideal to get it from the lender, and they should have a copy, said Buchko.

The amortization table is a set of tables that shows the total cost of your financing deal assuming all of your payments are made on time.

With the table in front of you, it becomes much easier to see if you’re currently paying more than what your vehicle is worth and if you’ll be in danger of being upside down on the loan (paying more than the vehicle is worth) in the future.

“With that information you should have all you need,” said Buchko. When analyzing and comparing the amortization tables for each loan offer, look for the one offering you the greatest overall savings, he recommended. Take a look at the interest rate you’re currently paying and the length of your loan, and see if you can make any adjustments to your lifestyle in order to save money.

For example, if the interest rate you’re paying isn’t very high, but your financing term is long and you see you’ll hit the ‘underwater’ point before your auto loan is completely paid off, you may want to consider increasing your monthly payments to pay off the loan faster (and get a chance to make money on a trade-in or sale before you can’t anymore).

While you’re looking at the contract, look at everything else it says, like the line items that were financed and any caveats in the terms, like a prepayment penalty that would penalize you for paying off the loan faster, as suggested above. You may also find there are elements of the loan agreement you didn’t really agree to.

“Sometimes the loans are packed with unnecessary things that are really expensive,” said Giorgianni. “If you feel you were misled, then go to the dealer and complain, and to a state agency if they don't help.”

If you think you were duped into taking on more financing or given an unfair interest rate at the dealership, file a complaint with agencies like the Consumer Financial Protection Bureau, the Federal Trade Commision or the Better Business Bureau. The CFPB and FTC are also two good resources for consumer information on auto financing.

### 4 options to explore if your auto loan is too expensive

If you realize your auto loan  payments are too costly, the interest rate is too high, or the loan term is too long, you can try taking these steps to get out of a bad financing deal as well as better afford your auto debt.

Option #1: Try to refinance for a better deal

When you’re noticing your monthly auto payment may be too large to fit your household budget, you could try to lower your monthly payment somehow, by reducing your interest rate or lengthening your loan term. You can accomplish either by refinancing your auto loan at more favorable terms to get your payment under control.

If your credit score was lower at the time you financed your vehicle, then you may have been given less favorable loan terms. Understandably, you can’t always perfectly time a car purchase. If you desperately needed a vehicle to get around and didn't have time to build your credit, your circumstances may have forced you into taking a bad deal. Now, if your credit score has improved or interest rates have gone down, you may have a better shot at reducing your interest rate.

“If it turns out that the main problem with the contract is that your rate is higher than it should have been, then a refinance is a good option but for a shorter or the same period,” said Giorgianni.

When you’re looking to refinance, compare loan offers with several different lenders, like your bank, a local credit union, and online loan search sites. Make sure to compare the final cost to you using the amortization table.

“Take a look at who is out there” said Buchko. “If you see another institution offering a lot better terms, contact them.” He recommends asking for the best loan arrangement you can get to pay off the loan when you contact a lender.

Extending a loan term to save money in the short run isn’t always the best savings strategy. But, if you need your vehicle and you are strapped for cash affording it, refinancing at a longer loan term may prove extremely beneficial. Giorgianni suggests borrowers avoid extending their loan terms unless it's absolutely necessary — for example, if “you can’t afford the car and it will be repossessed.”

Whatever you do, be careful to make sure that the offer you ultimately decide to go with is as good or better than your current loan offer. If there are any fees associated, take care to factor those in as well as they could drive your monthly payment higher. Pay attention to the total cost you’ll pay and consider passing on the deal if it’s higher than what you’d pay in your current arrangement.

Buchko recommends asking yourself: “Am I meeting a goal of a smaller payment?” and, “Is the overall final cost of the loan going to be worth the smaller payment?”

Buchko said he often recommends trying to negotiate your current terms with the lender holding your loan. “Go to the lender you have been working with and see if there is anything they are willing to do to help you,” he said. “It’s much better to work out some sort of arrangement before you fall behind.”

You may be able to negotiate a lower interest rate or work out a deferment arrangement where you can skip making payments for a period of time, but they will be added to the end of your loan term and you’ll ultimately have a longer loan and pay more interest over time.

Buchko said speaking with your current lender works because the lender that you're working with already has a vested interest in keeping you as a customer. However, he added, “a lot of it is up to the lender and how flexible they are willing to be to the customer.”

If your loan is still with the dealership, you may be out of luck if you want to negotiate better terms.

“Generally speaking, the dealer is probably not going to be interested in dealing with you,” said Jack Gillis, director of public affairs at the Consumer Federation of America and author of “The Car Book.”

If some time has passed since you made the purchase, the dealer probably doesn't hold the loan anymore, Gillis pointed out. Your loan has probably been transferred to another company, anyway. You could call that company and ask for a refinance, and they may or may not respond with another offer.

Option #3: Cut back on other spending in your budget

An oldie but goodie. It’s always a good idea to refine your budget if you’re having a tough time covering your bills. If your car payment is difficult to manage, and you aren’t able to refinance your loan for a lower monthly payment, you should take a look at your budget to see if there you can find a way to get the car loan under control.

First, calculate your monthly income. That’s what you’re working with each month. Next, subtract your fixed expenses. Those are fairly non-negotiable items in your budget that aren’t likely to shift much like your rent or mortgage payment, auto loan payment, food, and any insurance you’re responsible for paying.

According to the 50/20/30 budgeting rule of thumb, your fixed expenses should comprise no more than 50 percent of your total income. If they are higher, see where you can save money. You could dial back spending on food, for example, by cooking more of your meals at home or switching grocery stores.

Next, your savings. Subtract what you intend to save for the month. Under the 50/20/30 rule, about 20 percent of your income that goes toward saving for things like retirement and vacations, or funding an emergency fund.

What you’re left with is money you can use on flexible expenses like dining out and entertainment. It should be about 30 percent of your income if you’re able to follow the 50/20/30 rule. Your flexible expenses should be where you should look to make the most adjustments because you may have more room to cut back. You may find extra money by cutting back on how much money you spend on coffee each week, or reducing the number of shopping trips you take each month.

Selling your car can be a tough decision to make for a myriad of reasons. Your vehicle may hold sentimental value to you, for instance, or it may be the only method of transportation for you and your family.

“Unfortunately, most people don't want [sell the vehicle] but it's better than getting the car repossessed,” said Giorgianni.

If your current financing deal is too much for you to handle, or if you realize keeping the car will eventually lead you to holding an upside-down loan, selling it may be your best option.

“If you are in trouble, then your only option really is to sell the vehicle and keep your fingers crossed that you are not upside-down so that you can use the proceeds from the sale to pay off the vehicle,” said Gillis.

If you plan to sell, sell as soon as you can. The longer you own your vehicle, the longer it has to depreciate (lose monetary value).

“If the car is fairly new, there is still value in the car,” said Buchko. If the vehicle still holds some value, and it’s more than what you owe, you can try to trade it in and use whatever value it still holds to purchase a new car, under more favorable financing terms for your

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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# Ally Bank Auto Loan Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you’re familiar with online banking products, you’re probably very aware of Ally Bank’s presence in the online banking market.

But contrary to what it may seem, Ally isn’t a direct-to-consumer auto lender. That means you can’t find out whether or not you prequalify for an Ally Bank auto loan unless you go through a dealership. In 2016, Ally Auto served 18,000 auto dealerships and over 4 million auto dealership customers.

The thing is, it’s never a good idea to walk into a dealership before you’ve shopped around to get financing offers from multiple lenders. But with that being said, you might find yourself looking at a financing offer from Ally through a dealership and want to better understand how it works and what some alternatives might be.

In this post, we’ll take a look at the Ally Bank auto loan to let you know what steps are required to borrow and our take on the entire process. We’ll also cover rates and terms of Ally auto financing because we found them to be lacking transparency.

## Who Ally Bank auto loan financing is best for

We don’t recommend that anyone chooses an auto loan through a dealership unless you get a ridiculously good deal compared to other offers.

The far better move is to first shop around for interest rates on auto loans with multiple lenders. Then go to the dealership with financing already secured. This way you’ve had time to get preapproved for the most affordable financing you can get, and you won’t fall victim to a subprime auto loan.

When reviewing a dealership auto loan, compare the interest rate, monthly payment, and total costs to other loans to make sure it’s truly a better agreement overall.

Check out this post for an in-depth guide on how to borrow money before car shopping.

Here’s a summary of the steps you should take:

• Improve your score. Work on your credit score health since a higher credit score is what will get you the best loan offers.
• Get preapproved. If you’re worried that shopping for several loans will damage your credit score, you can breathe a sigh of relief. Having your credit pulled by several lenders within a 14- to 45-day period can count as a single inquiry and has a limited impact on your score.
• Take your preapproval with you when car shopping. You can make well-informed buying decisions with a preapproval in hand.

## How Ally Bank auto financing works

Ally Bank is an indirect auto lender. An indirect auto lender is one that offers loans through dealerships. You can’t call up Ally Bank directly to get auto loan rate estimates.

• Step 1: You go to a dealership that has a relationship with Ally Bank.
• Step 2: You choose a car you want to buy.
• Step 3: The dealership performs a credit review.
• Step 4: The dealership crunches numbers and comes up with loan offers you qualify for based on your credit and the car you’re buying.
• Step 5: You choose between offers, which can include an offer from Ally Bank.

One thing to be highly vigilant of with any indirect auto lender is that they may set a base interest rate and allow the dealership to tack on an additional markup on top of that rate. The interest rate markup can be revenue for the dealership and is an incentive to give you a more expensive loan.

Ultimately, it’s the dealership’s prerogative to make the most money possible regardless of what it costs you. To avoid getting finessed into a bad deal, it’s imperative that you search for auto loans from many lenders before car shopping at a dealership.

## Ally Bank auto financing products

Ally Bank has four auto financing options:

Buying. According to Ally Bank, their auto loans have flexible terms. Auto loans come with online account management, auto-payments, and speciality financing for accessibility needs.

Leasing. There are lease financing options as well. A lease is kind of like renting a car for a certain time frame. You may have a limited number of miles you can drive on your lease, and you may be responsible for car repairs. Leasing cars long term can be more expensive than buying. A situation where a lease may make sense is if you want to drive new cars every few years.

Otherwise, you’re likely better off saving to buy a car in cash or financing to own it outright. Learn what you need to know before leasing a car here.

Ally Buyer’s Choice. Ally Bank offers a middle ground option between leasing and buying called Ally Buyer’s Choice. With the Ally Buyer’s Choice program, you make regular payments on an auto loan until the 48th month. At that point, you can decide to sell back the car to Ally Bank, or you can continue making regularly scheduled payments on the car.

Ally Balloon Advantage. Balloon financing is when you have smaller monthly payments and a larger lump-sum payment at the end of the contract. The benefit of a balloon loan is that you can have payments that are lower than a regular term loan. The drawback is obviously the large payment you’ll have to come up with down the road. Learn more about Ally Balloon Advantage loans here.

## What we like about Ally Bank auto financing

The educational resources and account management tools. Ally Bank has an online and mobile app that can be convenient for account management. Ally Bank offers some articles on their website that can teach inexperienced car buyers what they need to know about auto loans.

There’s a post on whether it’s better for you to lease or buy. Ally Bank also encourages you to shop for rates with other lenders before car buying in its auto financing guide, which is sound advice.

## What we don’t like about the Ally Bank auto loan

Transparency is lacking. Since Ally Bank is primarily an indirect auto lender, there’s hardly any information available online or through Ally Bank customer service about fees, terms, or interest rates. There are no details on what type of cars (make or age) that qualify for financing.

Ally Bank points you in the direction of dealerships you can visit to see what loans you qualify for. The dealerships are pretty much the middleman.

In comparison, some lenders will give you more insight on auto loan products. You can also get preapproved for these products before ever stepping foot on the car lot. We’ll give you examples in the next section.

## Alternative auto loans

You should always shop around to compare rates before you head to a dealership. The dealer’s financing office may be able to beat your rate from another lender — but they won’t do that unless you’ve got an actual rate for them to see.

Use MagnifyMoney’s auto loan comparison tool to find great offers in your area.

Here are some lenders that will let you shop for loans before going to the dealership:

U.S. Bank – Rates start at 3.12% APR

The maximum you can borrow is \$100,000. You can get a 0.50% discount off of your interest rate if you buy an EPA-Certified SmartWay vehicle or sign up for automatic payments.

U.S. Bank lets you get preapproved online to check for rates and terms. The preapproval is free but does require a hard inquiry credit check. Remember, if you shop for auto loan rates with several lenders within a short time frame, it can count as a single credit pull.

LightStream – Rates start at 2.49% APR

You can borrow from \$5,000 to \$100,000. If you sign up for automatic payments, you can get a 0.50% rate discount. The process of getting a loan is simple. You apply online, accept your loan terms, and receive your funds to make the car purchase.

Your loan can get approved and funded the same day if your application process is complete before 2:30 p.m. ET on a bank business day.

Capital One – Rates start at 3.24% APR

Capital One lets you borrow between \$4,000 and \$40,000 for new and used cars. The car has to be 12 years old or older with less than 120,000 miles on it.

You can prequalify for rates on the Capital One website without a hard inquiry. Once prequalified, you can search for cars through Capital One partners and personalize your loan terms.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here

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# LightStream Auto Loan Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Updated February 13, 2018

Automobile shopping can be stressful. Besides trying to find just the right car for you or your family, there is the additional stress of finding the right price, the right financing, as well as factoring a monthly payment into your budget.

But with more online-only banks offering auto loans at extremely competitive interest rates, the auto loan game is changing. Today, your best bet is to obtain financing before setting foot in a dealership so you have a budget to stick to and you know exactly what your monthly payment will be.

### The Offer

LightStream offers both secured and unsecured auto loans from \$5,000 to \$250,000 and rates as low as 3.09%. LightStream can get money in your account in as little as one day in some cases, and always with no fees whatsoever.

### How To Apply

You can complete your LightStream auto loan application online, but you must 1) acknowledge receipt of LightStream’s Statement on the Use of Electronic Records, 2) agree to receive electronic records, and 3) agree to use electronic signature to sign your loan documents.

In order to apply, you will need:

• The purpose, term and amount of desired loan
• Phone number
• Social Security number
• Employment information
• Annual income
• Total amount of assets and equity in your home

During business hours, LightStream will email you regarding your application. If you are approved, you will be able to then go online, electronically sign your loan agreement, provide any additional information, as well as choose your funding and due dates. The funds will be transferred to your bank account on the funding date that you chose, on the same day in some cases.

To qualify, you must have either excellent or good credit. LightStream lists the following as criteria for excellent credit:

• Five or more years of significant credit history.
• A credit history with a variety of account types such as major credit cards (for example, Visa, MasterCard, Amex), installment debt (vehicle loans) and mortgage debt if applicable.
• An excellent payment history with no delinquencies or other problems repaying debt obligations.
• A proven ability to save evidenced by some or all of the following; liquid assets (stocks, bonds, bank deposits, etc.), cash down payments on real estate, retirement savings, and little, if any, revolving credit card debt.
• Stable and sufficient income and assets to easily repay current debt obligations and any new loan with LightStream.

Good credit is essentially the same criteria as excellent credit, as seen above, but with fewer than 5 years of credit history.

### Satisfaction Guarantee

LightStream does not provide any phone customer support for loans. Instead, it offers email support in an effort to keep costs low. Because the lack of phone support is unorthodox, it offers a \$100 guarantee within 30 days if you aren’t satisfied with your loan experience. If you are not satisfied and wish to claim the \$100 guarantee, you must contact customer service within 30 days of your loan and fill out a questionnaire.

### The Fine Print

Your APR will be based on creditworthiness, loan amount, and loan term, as seen in the chart below for an auto-loan on a new car:

 Loan Term(months) Loan Amount 24-36 37-48 49-60 61-72 73-84 \$5,000 to \$9,999 3.49% - 5.99% 4.34% - 6.59% 4.54% - 6.79% 5.44% - 7.69% N/A \$10,000to \$24,999 3.09% - 5.69% 3.19% - 5.94% 3.19% - 5.94% 4.04% - 6.79% N/A \$25,000 to \$49,999 3.09% - 5.69% 3.19% - 5.94% 3.19% - 5.94% 4.04% - 6.79% 4.64% - 7.39% \$50,000 to \$100,000 3.09% - 5.69% 3.19% - 5.94% 3.19% - 5.94% 3.84% - 6.59% 4.54% - 7.29%

Rates as of February 13, 2018 - New Auto Purchase

Rates in the chart above are shown inclusive of a 0.50% AutoPay Discount. If you choose not to enroll in AutoPay, your rate will reflect a 0.50% increase. AutoPay payments will come directly out of your bank account. Otherwise, you can choose to pay by invoice, which must be returned by mail. You cannot make payments at a SunTrust Bank branch.

LightStream does not charge any closing or disbursement fees. It also does not charge fees for prepayment. You can prepay principal on your loan by logging into your online account.

### Pros

• Rates as low as 3.09%
• Can borrow as little as \$5,000 or as much as \$250,000
• You can borrow for a new or used car
• Terms from 24 to 84 months
• No prepayment penalties
• No closing or disbursement fees
• Secured and unsecured loans

### Cons

• APRs as high as 7.94%
• APR will increase 0.50% if you don’t enroll in AutoPay
• Excellent or good credit required for financing

APPLY NOW Secured

on LightStream’s secure website

### How It Stacks Up

If a low APR is your priority, consider looking into an auto loan from Capital One. It offers APRs from 3.24% and terms of 36 to 72 months on new vehicles.  There is no origination fee, but it only offers loans up to \$40,000, with the option to get pre approval online before shopping.

APPLY NOW Secured

on Capital One’s secure website

New England Federal Credit Union is another option for an auto loan with used auto loan rates as low as 2.240% and terms from 12 to 96 months on new vehicles and 84 months on used cars. NEFCU can loan up to \$70,000 with no origination fee, but there is no option for pre approval.

LightStream offers a fairly straightforward auto loan experience whether you’re buying a new or used auto with low rates, long terms, and no fees for closing, disbursement, or prepayment. As with any loan, make sure that you are getting the lowest rate possible, as even one percentage lower can save you thousands of dollars in interest.

Finally, make sure that you can afford the monthly payment. Auto loan terms are getting longer, and you do not want to have an auto loan payment that is more than you can afford for 6+ years.

Find other auto loan options here.

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Gretchen Lindow |

Gretchen Lindow is a writer at MagnifyMoney. You can email Gretchen at gretchen@magnifymoney.com

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