There are numerous auto loan options available on the market today. You can opt into a bank, a credit union or go directly through a dealership, the choice is yours. What helps you define the best auto loan choice is how much you’ll end up paying in interest, any hidden fees, customer reviews, overall service package and any extra value-adds.
Some of the auto loan companies listed here have excellent APR rates but stringent credit score restrictions while others are more lenient with the credit scores but harsher on APR.
When making your final choice, you need to look out for a company that has a good reputation, that offers you relatively solid customer service, and that’s transparent around fees, late payments and penalties.
Compare auto loans at LendingTree
LendingTree isn’t a lender, but a marketplace where you can invite auto loan lenders to come to you. It’s an opportunity to get the lowest interest rates available from small companies you might never have heard of that can lend you money in your area.
1. LightStream Auto Loans: Best overall
Application process: Fast, simple and entirely online | APR: From 3.99% with AutoPay dependent on loan amount and terms | Fees: None | Loan terms: New vehicle, used vehicle, vehicle refinance, used vehicle 10-15 years, up to 84 months payment terms, no prepayment penalties
LightStream is the online auto loans division of SunTrust Bank and manages to successfully bridge the gap between traditional and digital banking. The APR on offer is 3.99 percent, which isn’t the lowest on the market, but the auto loans offering is hugely varied and caters to all types and tastes.
The process is completely digital, very fast and supremely efficient and your loan can be approved in under an hour. LightStream has been optimized for mobile devices – you can apply directly from your mobile phone – and everything is done online. There’s no call center, only email.
- Read the review: LightStream
2. Capital One Auto Loans: Best customer service
Best customer service
Application process: Online prequalification process | APR: From 3.99% dependent on loan amount and terms | Fees: None | Loan terms: New vehicle, used vehicle, vehicle refinance, up to 84 months payment terms, no prepayment penalties
When it comes to finance, loans and money, customer reviews are invariably mixed and often vitriolic – nobody likes having issues with their money or their credit scores. Capital One manages to emerge from the reviews relatively unscathed with a higher than average positive rating and numerous customers praising it for service and support. If you rate customer service as your highest requirement when picking where to put your auto loan, then this is very likely the right place for you.
- Read the review: Capital One
3. Alliant Credit Union Auto Loans: Best for low APR
Best for low APR
Application process: Easy, online, accessible | APR: 3.24% 60-month max term, new vehicle, 2.74% discounted new vehicle, 60-month term | Fees: Vehicle Service Agreement Transfer Fee $40 | Loan terms: New vehicle, used vehicle, vehicle refinance, used vehicle 10-15 years, up to 84 months payment terms, no prepayment penalties
Alliant Credit Union expects you to become a member before you can take out an auto loan, but it also offers you some of the best rates on the market. If you have a solid credit score and you want to leverage that to save money on a new car, then this is where you want to go.
The APR can be as low as 3.24 percent on a new car and 3.49 percent on a used car. You also get more choice in terms of types of vehicle you’re allowed to purchase and the approval process is really fast – you could have a new car in less than a day. While some of its competitors offer lower APR rates, these are hard to actually get and, as with Ally auto loans, impossible to find out until the last second. Alliant has made it easy for you to almost instantly see what APR you qualify for upfront.
- Read the review: Alliant Credit Union
4. Bank of America Auto Loans: Best for fast and efficient approvals
Best for fast and efficient approvals
Application process: Online, simple, well designed direct dealer access application | APR: From 2.99% dependent on amount, terms and banking institution | Fees: Title, state and loan fees may apply | Loan terms: New vehicle, used vehicle, vehicle refinance, and specialized vehicles with no prepayment penalties
The Bank of America does have a lower APR than Alliant Credit Union but this 2.99 percent is very much a rare beast that only a select few within very tight parameters can achieve. What actually makes this financial institution stand out is how quickly you can get into the system and your auto loan approved and ready.
The pre-approval process can take under 60 seconds and every step of the process is transparent and accessible. With Bank of America, you can find information quickly, get the costs and quotes you need efficiently, and you can potentially snag yourself an excellent interest rate.
- Read the review: Bank of America
5. U.S. Bank Auto Loans: Best for full-service banking on solid foundations
Best for full-service banking on solid foundations
Application process: Online, digital pre-approval, Zoom meeting and instore | APR: From 4.59% with dependent on amount, terms and banking institution | Fees: Origination fee | Loan terms: New vehicle, used vehicle, vehicle refinance, and prepayment penalties
U.S. Bank is a full-service banking institution which means that it is also more expensive, more demanding and far more fiddly in terms of paperwork and restrictions. It’s got a very high APR at 4.59 percent and to get that interest rate you have to be able to jump through some pretty high hoops.
There are competing banks that offer much lower auto loan rates but what makes U.S. Bank stand out is how it rewards existing customers. If you already have an account, you get discounts on specific transactions and costs, and you can expand from your auto loan into other financial services with relative ease.
- Read the review: U.S. Bank
6. Ally Auto Loans: Best for value added extras
Best for value added extras
Application process: Direct dealer application | APR: From 3.23 dependent on amount, terms and credit score | Fees: Fees apply, not disclosed | Loan terms: New vehicle, used vehicle
Ally has included two extra services into its auto loan bundle that help elevate it from the competition. The first of these is the Ally Balloon Advantage program that lets you make lower monthly payments in favor of a balloon payment at the end. The second is the Buyer’s Choice program that helps customers build a payment structure that blends both leasing and buying options. The company has also developed an app that allows for granular control over costs, payments and transactions.
- Read the review: Ally
7. Wells Fargo Auto Loans: Best for low credit scores
Best for low credit scores
Application process: Direct dealer application or call | APR: From 3.90 dependent on amount, terms and credit score | Fees: Fees apply, not disclosed | Loan terms: New vehicle, used vehicle
Wells Fargo is another financial institution that adds value if you are already an account holder with the bank but that doesn’t limit what you can get as someone coming in fresh for an auto loan either. In fact, the bank has made it relatively easy for people to get a loan even if they don’t have a spectacular credit score. You will pay more – the fees and the APR are higher here than some of the other auto loan providers – but you are more likely to be approved for a loan if you have a poor credit score.
- Read the review: Wells Fargo
LendingTree is a great service that lets you invite auto loan lenders to come to you with quotes. It is a great place to start your search for an auto loan, as it has a large selection of lenders that offer competitive rates and terms.
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How do auto loans work?
What to Know Before Applying for an Auto Loan
Most auto loans are simple interest loans that are secured against the vehicle.
The majority of auto loans are structured so the monthly repayments at the start of the loan you pay high amounts of interest (the fee you are paying the lender) and slowly shifts to repayment of the principal (the amount you borrow) the closer to the end of the term the loan gets. Auto loan terms usually varying between 36 and 72 months.
Longer loan term mean smaller repayments but usually results in a bigger over all cost and repayment.
You can get auto loans with bad credit, but this will affect the rate of the loan. As there is a higher risk, you will have a higher repayment on the loan.
Auto loans are available through dealership, bank, online or credit unions.
What to know before applying for an auto loan
An auto loan isn’t a mortgage, but it’s still a significant expense that affects your finances. Before applying here are some things to do.
Check your credit: Knowing your credit score before you apply can give you a clearer idea of what rates you can expect to pay. There are many free options for checking your credit score, and some credit cards offer free monthly credit checks. Alternatively read our guide on services that offer the Best Credit Report. You can still get an auto loan with bad credit, but you will be paying a higher premium for it.
Get pre-approved: Getting preapproved for a loan gives you an advantage when shopping for cars. By knowing how much you can afford, you’ll be better positioned to negotiate with dealers.
Come prepared: To apply for an auto loan, you’ll need to provide the lender with the necessary documents. Most want to see proof of income, credit and banking history, proof of residence and proof of insurance. Getting a loan through your current bank or credit union makes this step much easier, since they will have much of this information on hand.
Remember your budget: This goes for your monthly payment, down payment and the total auto loan amount. Make sure you can afford the monthly payment. You don’t want to fall behind and risk losing the car. According to an Experian study, the average monthly payment on an auto loan is around $532. You’ll also need a down payment, usually 20% for a new car and 10% for a used car. A great way to keep in budget is through an auto loan calculator.
Use dealers as a last resort: Dealers may sometimes be your only option, especially if you have poor credit. But always try and find financing through a bank or credit union because you’ll usually get a lower rate. Dealers also tend to add markups to the interest rates, so you’ll end up paying more if you get a loan through a dealership.