If you’re looking for a $20,000 car loan, you have plenty of new and used models to choose from, as well as many financing options to consider. While secured car loans from a third-party lender might come with the most competitive rates, leasing or financing directly through a dealer can likely get you behind the wheel faster.
4 ways to get a $20,000 car loan
Here’s how your 4 different financing options stack up when you’re looking for a $20,000 car loan:
1. Secured car loans
Banks, credit unions and online lenders all offer secured $20,000 car loans backed by the car you’re purchasing. These usually come with the most competitive rates, though it can take time to compare lenders and fill out pre-qualification forms. Rates for secured car loans could range from 3% to more than 30% APR depending on your credit score and personal financial situation.
2. Unsecured personal loans
Don’t want to use your car as collateral? An unsecured personal loan from an online lender, bank or credit union may be a better fit. You could borrow $20,000 with a personal loan. However, these typically come with higher rates — typically from 5% to over 40% APR.
3. Dealership financing
Financing through a dealership is usually the easiest and fastest option to get a $20,000 car loan, but it also tends to come with higher interest rates. This is because the dealer usually tacks on extra interest and fees to act as the middleman between you and the lender.
4. Car leases
Not sure you’re ready to buy? Like driving the latest model? Leasing through a dealer might be for you. Essentially, you rent the car for a set period of time — usually two or three years. Once your contract is up, you’ll usually have the option to continue the lease, upgrade to a new car or purchase the vehicle outright. However, leases typically come with mileage restrictions — and it can get expensive if you go over them.
The monthly payment you’ll have to pay on a $20,000 car loan will depend on the loan terms you sign up for, like your interest rate and term length. We’ve calculated how much the payments on a $20,000 car loan would be for different loan terms in the table below.
Interest rate
4 year loan monthly payment
6 year loan monthly payment
3.5%
$447.12
$308.37
6%
$469.70
$331.46
10%
$507.25
$370.52
Car loan monthly payment calculator
Calculate how much you could expect your monthly payment to be on a $20,000 car loan.
Enter the amount you want to borrow to buy a car under Loan amount. This might not be the same as the cost of your car, since some lenders require a down payment.
Write the amount of time you have to pay off your car loan under Loan terms (in years). If your loan term is in months, divide it by 12 first.
Enter the interest rate you expect to pay on a car loan under Interest rate. If your car loan comes with fees, enter the annual percentage rate (APR) instead.
Click Calculate.
In addition to your monthly payment, this calculator shows how much you’d pay on your loan’s principle amount and how much you’d pay overall in interest. The principle amount is the amount that you borrowed and should be equal to your loan amount. Total interest is the amount you would pay on top of the principle — the cost of having your loan.
How to compare $20,000 car loans
When comparing your car loan offers, keep these factors in mind to ensure you get the best deal:
Interest rate. Interest makes up the bulk of your car loan expense, so you’ll want to find the lowest rate out there. Most lenders let you choose between fixed and variable rates. Fixed rates stay the same throughout the life of the loan and can be easier to budget for. Meanwhile, variable rates fluctuate due to changes in the lending market and can go lower — or higher — than fixed rates.
Loan term. Traditional car loans come with terms from 3 to 7 years. In general, the shorter the term, the lower the interest rate. However, this will also lead to higher monthly repayments. Use our car loan calculator to find the shortest term with repayments you can comfortably afford each month.
Fees. Watch out for lenders that charge high application, origination or documentation fees. You could also be on the hook for prepayment penalties if you pay off your loan before your term is up.
Should I buy a new or used car with a $20,000 car loan?
There’s always going to be a debate over which is better: new versus used cars. For many, there’s a certain peace of mind that comes with owning a brand-new car, like having a warranty, knowing there’s no possibility of previous damage and that enticing new-car smell. However, new cars can decrease as much as 60% after the first 5 years of ownership due to depreciation.
With a used car, you’re usually able to benefit from a lower sticker price. But it might not have the latest bells and whistles that the latest model has. And while there’s a risk of not getting what you paid for, going through a certified pre-owned dealer rather than a private seller can help minimize that risk. Also consider that you can often afford a used car with a $20,000 car loan that would have been too expensive to buy as a new car.
What car can I buy with $20,000?
While $20,000 won’t snag you a new Benz, it can get you a pretty nice car — new or used. Here are some of the top cars currently on the market with price points around $20,000:
New cars
2022 Hyundai Kona
2021 Mazda 3
2022 Toyota Corolla
2021 Hyundai Elantra
2021 Kia Forte
Used cars
2017 Audi A3
2017 Jeep Cherokee
2017 RAV4
2019 Volkswagen Jetta
2017 BMW 3 Series
4 questions to ask before applying for a $20,000 car loan
Not sure a $20,000 car loan is right for you? Ask yourself these questions to help you decide:
How much will it cost me overall? Although it might seem like you only owe $20,000, this isn’t entirely true. Once you factor in dealer fees, taxes, title and registration fees — on top of your loan’s interest and fees — the cost can quickly add up. Make sure you can comfortably afford repayments before borrowing $20,000.
Can I make extra payments without getting charged? Suppose you come into some extra cash that you want to put toward your car loan. Does your lender charge prepayment penalties? If so, is it worth paying the fee to avoid extra interest building up?
Is my job stable? If you’re worried about layoffs or considering switching careers, you might want to hold off on taking out a car loan until you’re on more solid financial ground.
Can I afford to maintain a vehicle? In terms of a car’s running costs, you’ll want to make sure you can afford to pay for fuel, insurance premiums and general vehicle maintenance before committing to a car loan.
Bottom line
If you have decent credit and want to get a loan as quickly and easily as possible, financing through a dealer might be your best bet. However, you might be able to score a more competitive deal by comparing your car loan options from banks and online lenders yourself.
Frequently asked questions about $20,000 car loans
It depends on your priorities and personal financial situation. Secured car loans usually come with more competitive rates — though you risk losing your car if you can’t afford repayments. On the other hand, an unsecured personal loan doesn’t require you to use your car as collateral. However, these typically come with higher rates.
This depends on the lender. Some require that your car be less than seven years old to qualify, while others have more lenient criteria. Find out more with our used car loans guide.
Maximum loan terms vary by lender, though many allow you to take up to seven or even eight years to pay back your loan.
Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University.
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