We’ve compared nearly 100 lenders based on the type of car loans offered, the average interest rates and the total amount you’re able to borrow. The best lenders accept a wide variety of borrowers and offer lower maximum rates.
For 2021, we reviewed our list and made a few changes to our choices. Ally Clearlane replaces LendingClub as our choice for refinancing your current loan, and PenFed replaces Alliant as our top pick for financing through a credit union.
LightStream is an online lender backed by Truist Bank. Its interest rates are competitive — frequently some of the lowest out there. And unlike most lenders, offers same-day funding on car loans. You'll need good to excellent credit to qualify, and there's no preapproval process, which means applying with LightStream will result in a hard pull of your credit.
Carvana is an online dealership that offers a simple financing process for its used car inventory. Interest rates start decently low at 3.9% — although they can reach a high 27.9%. And while financing can only be used at Carvana, you have up to 45 days to choose your car. Combined with Carvana's seven-day return period, it's an easy way to avoid getting stuck with a car — and a loan — that doesn't suit your needs.
With lenders offering interest rates as low as 1.79%, myAutoLoan.com is a solid connection service when you need help finding a lender. It accepts borrowers with low credit, and its network of lenders are transparent about their rates. However, you have to borrow at least $8,000. And because it sends your information to multiple lenders, you may receive marketing materials even after you get a loan.
Ally Clearlane — formerly just Clearlane — offers competitive interest rates on refinancing. This is a great choice if you've improved your credit or want to change up the terms of your current loan. But beside its lease buyout option, it doesn't offer other types of financing, including new or used car loans. You'll also need to rely on its customer service for the information it doesn't list on its website.
Low starting APR of 3.74%
Lease buyouts also available
Limited information available online
High minimum monthly income requirement of $2,000+
While you will have to open an account with PenFed — and wait at least 90 days to get preapproval — it's one of the least expensive options out there for new and used cars. But if you're looking for a credit union that offers in-person services, it may not be the best choice: It only has branches in a handful of states and US territories.
Bank of America is one of the top banks out there with low starting interest rates and a wide selection of loan options. While you're generally stuck buying from its network of dealerships, Bank of America will finance private-party loans. Just be sure any vehicle you're looking at meets its long list of minimum requirements.
Extremely low starting APR
Multiple car loan options
Large maximum loan amount of $100,000
Limited dealership network
Must have BofA bank account to apply for private-party purchase
M&T Bank is one of the few banks that offers financing for RVs, boats, motorcycles and other leisure vehicles. It offers clear rates and terms, although the fees you might pay aren't easily found. And while you'll find a wide variety of vehicles covered, M&T Bank has a limited reach — it only has branches in eight states and Washington, DC.
Low starting rates for boat and RV loans
APR discount for current customers
Long loan terms available
Limited state availability
Not all fees are transparent
Starting at $2,000
3.49% – 14%
Starting at months
Interest Rate Type
How can I get a good rate on a car loan?
Here are a few pointers to nab a good deal on your next car loan:
Consider a newer vehicle. New car loans come with lower interest rates because the lender is taking on less of a risk. Most new car loans allow you to secure a vehicle that’s less than two years old, although some may only be for cars that haven’t been previously owned.
Apply within 45 days. When you apply for multiple car loans, keep your applications within a short period — typically no more than 45 days. Most credit bureaus will count it as one line on your credit report, saving you from lowering your score every time you fill out an application.
Get preapproved. The easiest way to avoid an inquiry is to apply for preapproval. Many lenders are able to quote you an estimated rate without doing a hard credit check.
Note all of your assets in your application. Some lenders offer lower interest rates if you have a large sum of money to fall back on. Even if you’re applying for a secured car loan, listing other assets may help you get a better rate.
Borrow less than you’re buying the car for. Having a down payment or trade-in can make you eligible for a lower rate if a lender sees you don’t need to borrow 100% of the purchase price of the vehicle.
Compare your options before you apply. Comparing offers from different car loan providers can help you find the lowest rate available to you. If you don’t want to do this yourself, you can consider using a car finance broker or online connection service.
How is my interest rate determined?
Car loans can come with rates as low as 2%, but the rate you qualify for depends on several factors, including:
Credit score. The best rates go to borrowers with the best credit score.
Income. The higher your income, the more likely you are to get a good deal.
Debt-to-income ratio. Having regular monthly debt expenses worth 20% or less than your income can also get you a better deal.
Car type. New cars typically come with lower rates than used cars.
Loan term. Often longer loan terms come with higher rates — especially at credit unions.
Compare lenders that specifically assist people with poor credit.
Should I use manufacturer financing?
Manufacturer financing can be a good option if you have excellent credit and a strong credit history. This is because many manufacturers offer special deals on new and certified preowned (CPO) cars. These can include cash back, 0% financing and other discounts — all of which can drastically lower your monthly repayment.
But these deals are difficult for most borrowers to qualify for. If you want to get the best rate, take the time to see what other lenders will offer. Then you can compare it to the manufacturer — or dealership — financing option to ensure you’re picking the right loan.
Will I get a better deal with a larger down payment?
In general, yes. Lenders may be more willing to offer favorable terms if you have money saved up to use as a down payment. A larger down payment also means you have to borrow less, which reduces your monthly payment and how much you’ll pay in interest.
For instance, say you’re looking to borrow $15,000 for a new vehicle. The lender you’ve chosen to go with offered you a 60-month term with a 7.45% APR.
The truth? There’s no single best car loan out there. Not everyone looking for a car loan is buying the same car, earns the same income or is in the same financial situation. It’s up to you to compare your car loan options and find the lender that best fits your needs.
Kellye Guinan is a seasoned financial writer with over 500 articles under her belt spanning all things loans from auto to personal to business and everything in between. With four years in the field and five years of research experience, she's able to make complex personal finance decisions easier for anyone to tackle. When she's not up to her knees learning about the latest trends in lending, she spends her time improving her own financial literacy and expertise — and maintaining a Duolingo streak of over 1,300 days.
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