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Best Auto Loan Rates and Financing for July 2024

Company Used APR Range Used Loan Amounts Used Loan Terms Min. Rec. Credit Score
PenFed Best Overall 6.49%–17.99% $500–$150,000 3–7 years Not disclosed
AUTOPAY Best for Bad Credit/Low Rates As low as 5.69% $2,500–$100,000 2–8 years 500
Consumers Credit Union Best Credit Union As low as 6.84% $500–$350,000 36–84 months Not disclosed
LendingTree Best for Refinance As low as 5.99% (Refinance) Not disclosed 36–72 months (Refinance) Not disclosed
LendingClub Best for Fair Credit 4.99%–24.99% (Refinance) $4,000–$55,000 2–7 years (Refinance) 600
Carvana Best for Full Car Buying Experience Not disclosed Not disclosed Not disclosed 500
OpenRoad Lending Best for High Maximum Accepted Mileage 1.99%–24.99% (Refinance) $7,500–$100,000 (Refinance) 24–72 months (Refinance) 500

Looking for a specific type of loan? See our top picks for auto loans in a variety of categories:


Guide to Choosing the Best Auto Loan Rates and Financing

What Is an Auto Loan and How Does It Work?

An auto loan is an installment loan used to buy a new or used car, or to refinance an existing auto loan. Auto loans are usually secured, which means the vehicle serves as collateral for the loan. If you fail to make monthly car payments as agreed, the lender can seize the vehicle.

You can use a personal loan to make a car purchase, but secured auto loans typically have lower rates because lenders have more security if you don’t pay as agreed.

Auto loan lenders may allow you to borrow more than the purchase price of the car, to account for taxes, fees, dealer upgrades, and other add-ons.

Like other installment loans, when you borrow money with an auto loan the funds are provided in a lump sum. The borrower makes equal monthly installment payments until the term loan is paid off. The money is lent at interest, so the borrower ends up paying back more than they originally borrow.

Auto Loan Rates

Longer loan terms may come with a lower monthly payment and lower annual percentage rates (APRs), but don’t be fooled. In general, it’s best to choose the shortest term and the highest monthly payments you can afford.

Although long-term loans may come with lower monthly payments, making them more affordable on a month-by-month basis, shorter-term loans will make the overall cost less expensive because you accrue less interest. When the loan is fully paid off, the vehicle belongs to the borrower (instead of the lender).

Where To Get an Auto Loan

Auto loans are available from traditional banks, online banks, credit unions, and lending marketplaces (which partner with banks and credit unions). You’ll find new, used, and refinance auto loans from all of those sources, although some lenders only offer certain loan types; some lenders offer special deals for first-time car buyers, as well.

Auto loans are also available through dealerships that partner with banks; in some cases you may find lower rates through a dealership, but it’s worth getting pre-approved with lenders on your own to see what kind of rates you can get. Then, you can go to the dealership with some bargaining power—see if the dealer will beat the best rate you found on your own.

Learn more in our expert explanation of how auto loans work.

Types of Auto Loans

Some people choose the type of car they get based on the type of loan they’d like. For example, new cars are more expensive, but the loans are often much cheaper than for used cars—and that’s one reason many people prefer new cars over used cars. 

  • New car loan: Just about every lender offers new car loans. They feature lower rates and may come with longer term lengths since you’ll likely be financing a car that costs more, given the higher price tag for new cars.
  • Used car loan: Equally common, the rates on used car loans are generally a bit higher. Lenders may have more restrictions in place for loan approval, such as only being able to buy used cars from dealerships or cars below a certain age or mileage level.
  • Auto loan refinance: Many lenders offer refinance loans, which are used to pay off your current loan contract, replacing it with a new one. You might do this to get lower monthly payments and/or to pay off your loan faster while saving money.
  • Cash-out refinance: A cash-out refinance works the same as above, except you borrow a higher amount of money than you need. You get the difference back as cash that you can use for other things, like home repairs or debt consolidation. 
  • Auto title loan: These are similar to payday loans except your paid-off (or mostly paid-off) car serves as loan collateral. Auto title loans are extremely expensive and difficult to repay, resulting in some borrowers having their car repossessed, so we don’t recommend them.
  • Buy-here-pay-here loan: These dealerships market to people with bad credit. Your car may come installed with a tracking device to make it easier to repossess, and you may be charged exorbitantly high rates. We don’t recommend buy-here-pay-here loans.
  • Lease buyout loan: It can be difficult and expensive to get out of a car lease contract early so you’ll need to calculate the costs for all of your options carefully. If you can’t pay cash, some lenders offer a lease buyout loan for this purpose.
  • Private party auto loan: A private party auto loan is used to purchase a vehicle from a private seller—i.e., not a car dealership or business. Only some lenders provide loans for private party purchases.
  • Bad credit car loans: Some lenders offer auto loans of various kinds for people with poor credit; these loans are just like any other kind of loan, but they typically come with higher interest rates and fees.

Auto loans can either be secured or unsecured. Most auto loans are secured by the very car you’re buying and offer lower rates because of that. Your car serves as collateral for the loan and if you don’t repay it, the lender will repossess your car.

Unsecured car loans aren’t as common, but some lenders (like LightStream) do offer them. They’re often faster to get but they charge much higher rates because the lender doesn’t have an easy way to get their money back if you default.

How to Get the Lowest Interest Rates On Your Auto Loan

Auto loan rates depend in part on the federal prime rate, but the borrower’s qualifications play a large role as well.

  • Shop around: Different lenders offer different interest rates; seek out lenders with low minimum APRs and get pre-approved to check your rates.
  • Build your credit: There are many ways to improve your credit score—some can be quick, like reducing your credit utilization, while others can take some time, like building up a history of on-time payments.
  • Increase your income: Having more money available (either for a down payment or for monthly payments) can improve your odds of getting a good rate.

Pre-Qualification vs. Pre-Approval

When it comes to auto loans, pre-qualification and pre-approval usually mean different things. But it’s important to realize that some lenders and advice columns may use the terms interchangeably.

Pre-qualification generally involves a lighter, less extensive check than pre-approval. Pre-qualification may only require some basic personal information, and the lender may perform a soft credit check, which has no effect on your credit score. Information provided for a pre-qualification won’t be verified by the lender—it’s just meant to give you an idea of the rate you may qualify for.

Pre-approval involves a more in-depth check of your credit and finances. It typically requires a hard credit check, which can slightly affect your credit, and the lender may ask for more information and documentation. The lender may attempt to verify the information, as well.

Neither pre-qualification nor pre-approval mean that you’re guaranteed to be approved.


Auto Loan Rates by Credit Score

Credit Level/Score Used Car Loans New Car Loans
Super Prime: 781–850 6.80% 5.38%
Prime: 661–780 9.04% 6.89%
Nonprime: 601–660 13.72% 9.62%
Subprime: 501-600 18.97% 12.85%
Deep subprime: 300–500 21.57% 15.62%
Data from Experian’s State of the Automotive Finance Market Report Q1 2024.

How to Apply for an Auto Loan

  1. You can get an auto loan from several different types of lenders: online lenders, banks, and credit unions. Dealerships themselves also partner with these lenders to offer you financing.
  2. It’s best to do your loan shopping before you actually start looking for a car, because you can take the time to find the best loan options and you’ll have more bargaining power when you do find the car you want.
  3. Each lender will check two things in order to approve your loan: your financial situation and the car you want to buy.
  4. You can start the loan shopping process by getting pre-approved with multiple lenders. This may require a hard credit inquiry, in some cases. Chances are, some lenders will offer lower rates than others.
  5. If you’re pre-approved based on the initial details you provide, including personal details like Social Security number and some financial details, the lender will let you know what rates and terms you’re likely to qualify for.
  6. Lenders look for a few things. Your credit score, income, and debt payments are three of the most important factors, so it’s a good idea to clean up your credit in advance if it needs work and you have the time. Consider ways to reduce your debt-to-income ratio.

If you’re not able to qualify on your own and you have someone who’s willing to help, applying with a co-signer can improve your odds of qualifying for a loan.

“When my wife and I were shopping for a car last year, we prepared by getting a pre-qualification from our bank—Bank of America. We did it online, through our account portal. It was really easy, and because we have several accounts with BofA, we qualified for a rate discount. We planned on using the pre-approval as a negotiating tool, and figured the dealer would offer a better rate. To our surprise, the dealer couldn’t beat it. So now we have yet another account with BofA.” — Lars Peterson (Investopedia Senior Editor, Financial Products and Services).

Once you find the car you want, you can provide the details to your chosen lender and submit a full loan application. The lender will usually disburse the loan funds directly to you, either by check or bank deposit. In some cases lenders may send the money directly to dealerships; for refinance loans, lenders may send the money directly to the current holder of your loan.

Your new lender will provide you with details on how to set up an account, manage your loan, and make payments.


Auto Loan Calculator

See how much car you can afford with our auto loan calculator; plug in your details, and you can see how big your monthly payments will be at different terms and interest rates.

Say you take out a loan for a new 2024 Ford F-150 Platinum with the following details, for example:

  • Car price: $64,915
  • Down payment: $5,000
  • Loan amount: $59,915
  • Loan term: 72 months
  • Credit: Fair (601–660 credit score)
  • Interest rate: 7.14%
  • Total paid over the life of the loan: $73,837.72

With those terms, you’d have a monthly loan payment of $1,025.52. If you were to make a larger down payment, such as $8,000, you could take out a smaller loan ($56,915), and your monthly payment would be $974.17. You’d pay less overall: $70,140.59 over the life of the loan.

In the News: Auto loan rates are related to the Federal Reserve’s benchmark rate—if the Fed rate goes up, average auto loan rates usually will, as well. The Fed held rates steady for a seventh consecutive time at its June 12 meeting. The federal funds rate is at its highest level since 2001, but Fed officials are projecting one or possibly two rate cuts before the end of the year. The 5.25% to 5.50% range is the highest the federal funds rate has been since 2001. With consumer prices showing a 3.4% inflation rate in April, Fed officials don’t foresee reducing their benchmark rate until they’re confident inflation is moving toward 2%.


Auto Loans: Pros and Cons


Pros

  • Provides access to a car: If you need a car to get to work or school and can’t afford to buy one with cash, an auto loan can give you that access to the transportation you need.
  • Spreads out the expense of a vehicle purchase: Even if you have enough cash to buy a car, auto financing spreads out that expense, so you don’t deplete your savings all at once.
  • You’ll own the car: Your lender technically owns the car while you pay down your loan, but once it’s paid off, you’ll own the car outright. New car leases can save you money with lower monthly payments, but there’s no vehicle ownership.
  • Flexible loans: Auto loans can offer flexibility with loan amounts and repayment terms to help fit into your budget.
  • Can help build credit: Like other installment loans, auto loans can be used to build credit as you make on-time monthly payments.

Cons

  • Interest rates can be high: Auto loan rates are lower than what you can expect from a personal loan or credit card. But if your credit isn’t in great shape, you can still end up with a high interest rate, which could make monthly payments unaffordable.
  • Vehicles depreciate: While you’re paying down your loan, the value of your vehicle is depreciating. If the vehicle’s value is less than what you owe on your loan, you may have to pay the difference when you sell the car or if the vehicle gets totaled in an accident.
  • Can damage your credit: If you miss a payment by 30 days or more, it could damage your credit score significantly.
  • Default can result in repossession: If you fail to make payments for a longer period, your lender could repossess the vehicle and sell it to recoup the remaining loan balance. If there’s a deficiency after the sale, you may still be on the hook for that debt.


Where Are the Big Banks?

We included big banks like Chase, Capital One, Bank of America, and U.S. Bank in our review of the auto loan industry, but these financial institutions don’t always make our “Best” lists.

Why? Although these banks are reliable and used by millions of people, they usually don’t offer the very best rates and terms. Online banks and lender marketplaces tend to have lower operating costs, and can pass those savings on to borrowers. Big banks tend to score well in our rankings, but they don’t usually come out on top when it comes to auto loan interest rates, flexibility in terms, and accessibility.

Frequently Asked Questions


  • Not everyone qualifies for the best auto loan rates. Here are some things you can do before and during the application process to tip the odds in your favor:

    • Check your rate with as many lenders as you can (within a short timeframe).
    • Pay down your existing debt, especially credit card debt.
    • Check your credit score and credit reports, and fix any errors before you apply for a loan.
    • Use your loan pre-approval offers to negotiate a lower rate with the dealership.

  • There is no overall minimum credit score you’ll need to qualify for an auto loan. It depends on the lender; each lender has its own credit requirements. In general, if you have good or excellent credit (670 or higher), you’ll qualify for the best auto loan rates. Lenders typically use an auto-loan specific credit scoring model (like a FICO score or VantageScore). See the best car loans for bad credit if you’re dealing with a lower score.

  • You can obtain an auto loan through a dealer in a dealer-arranged financing agreement or directly from an online lender, credit union, or traditional bank. Some dealers also offer in-house financing for car buyers with bad credit.

  • Ultimately, the best time to buy a car is when you need one. But if you have some flexibility, experts recommend the following times:

    • The end of the month, quarter, or year: Car salespeople often have to meet quotas for each month, quarter, and year, so they may be motivated to make a deal toward the end of those periods to ensure they make the cut.
    • Three-day weekends: Dealerships often run sales events for President’s Day, Memorial Day, Labor Day, and other three-day weekends. The same goes for other holidays, such as the Fourth of July and Black Friday.
    • The end of the model year: Dealers may offer deals to get rid of inventory and make way for the latest model. Research when new models are released for the car you want and see if it can help you with negotiations.

  • According to a report by Experian in Nov. 2023, average rates for 2023 were 7.03% for new cars and 11.35% for used cars, although rates will have changed somewhat since then. If you get a rate lower than the average, you can generally feel like you’re getting a good deal. Your rate will vary depending on your credit score, income, and other factors.

  • By Nov. 2023, the average interest rate for used cars in 2023 was 11.35%, according to Experian. Here’s the average used car loan interest rate for each credit score range:

    • Super prime: 7.43%
    • Prime: 9.33%
    • Near prime: 13.53%
    • Subprime: 18.39%
    • Deep subprime: 21.18%

  • We researched and reviewed 21 companies to find the best seven lenders you see on the list above. While we write individual reviews for most companies, we do not always write reviews for companies we would not recommend. Below are the companies we researched along with links to individual company reviews to help you learn more before making a decision:

    Alliant Credit Union, AUTOPAY, Bank of America, Capital One, CarMax, Carvana, Chase Auto, Consumers Credit Union, Credible, First Tech FCU, LendingClub, LendingTree, LightStream, NASA FCU, Navy Federal Credit Union, OpenRoad Lending, PenFed, PNC Bank, U.S. Bank, USAA, Vroom.



Other Types of Auto Loans



Guide to Auto Loans

Learn more about auto loans:



How We Picked the Best Auto Loans

Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of auto loan lenders. To rate providers, we collected hundreds of data points for a period of over two months across more than 20 auto loan lenders, including interest rates, fees, loan amounts, borrower requirements, and vehicle requirements, to ensure that our reviews help users make informed decisions for their borrowing needs. We also conducted a survey of 1,016 auto loan borrowers for attitudes and opinions about lenders and the loan approval and disbursement process.


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