If you’re in the market for a new or used vehicle, you might consider taking out a car loan to pay for it. Few people have the financial resources to pay cash outright for a new vehicle, so auto financing is incredibly popular. Once you decide it’s time to purchase a vehicle, you’ll need to procure funding. You have many options, including traditional banks and credit unions, financing through the dealership, and the online marketplace. How do you know the best place to get a car loan?
What Is a Car Loan?
When purchasing a vehicle, many people borrow money via a car loan through a lending institution. With a car loan, you agree to pay the money back to the lender over a set amount of time with a predetermined annual percentage rate (APR). You will make monthly payments that include interest until you’ve paid the loan off in full. For example, if you were to borrow $20,000 for your vehicle purchase at 5.5% interest for 60 months, you’d end up paying back a total of $22,921.39. The lender would profit $2,921.39 from the transaction.
Many factors determine loan details such as APR and loan length. These include:
- Your credit history and score
- Your income
- Amount financed
- Length of loan
- Vehicle’s age
- Vehicle type
- Down payment
In addition, the amount financed, vehicle’s age, and vehicle mileage will determine the length of your loan offer. Most financial institutions don’t offer financing options for vehicles with more than 125,000 miles or over 10 years of age.
Know Your Credit Score and History
One of the most significant factors in determining your APR is your credit score and history. Your credit score and history are two different things, although the history is used to calculate your score. A credit score reflects the calculated risk of defaulting on a loan. The higher your score, the less likely you are to default, making you a more desirable customer to lenders.
Many banks and credit card companies will provide your credit score on a monthly statement or via their mobile app. If your credit score doesn’t seem correct, request a copy of your credit history for review. You can get a free copy of your credit history once a year from the three main reporting credit bureaus:
- Equifax
- Experian
- TransUnion
Your report is available by calling 877-322-8228 or visiting AnnualCreditReport.com. If you notice a discrepancy in your report, take action to correct it immediately. If you want to improve your credit score before applying for vehicle financing, you can do the following:
- Pay down debt
- Pay bills on time
- Consolidate debt
- Fix discrepancies
- Deal with delinquencies
- Limit hard inquiry credit checks
You won’t see an immediate change in your credit score, but after a few months of practicing better credit habits, you should be able to improve your score.
Where Is the Best Place to Get a Car Loan?
There is no one answer to this question. The best place to get a car loan for you depends on several aspects, such as whether you’re purchasing a new or used vehicle and your credit score. According to Business Insider, here are a few of the best places to get a car loan, based on specific criteria:
Bank of America (BOA)
Bank of America is an excellent option for a lease buyout loan. New car interest rates start at 3.79%, with used car rates starting at 3.99%. Refinance and lease buyout rates start at 4.89%. You can borrow from $7,500 to $150,000 from BOA. This institution receives a 4.5 out of 5 editor rating from Business Insider.
LightStream Auto Loan
LightStream Auto Loan could be your best place to get a car loan if you have excellent credit. LightStream has interest rates for new, used, and refinancing from 3.49% to 9.49% and a lease-buyout option from 4.49% to 10.49%. You can borrow between $5,000 and $100,000 from LightStream, and the company receives a 4.5 out of 5 from Business Insider editors.
Capital One Auto Finance
For borrowers with bad credit, Capital One Auto Finance can be your best place to get a car loan. New vehicle loans start at 2.99%, and used, refinance, and lease buyouts are available at an unspecified rate. Loan amounts start at $4,000. Business Insider editors give Capital One a 4 out of 5 rating.
Ally Clearlane
If you already have a car loan but wish to refinance it to lower your monthly payment, Ally Clearlane can be a great choice. Refinance and lease buyout rates are 3.74% to 7.49%, with a borrowing range of $10,000 to $80,000. Clearlane receives a 2 out of 5 rating from Business Insider.
U.S. Bank Auto Loans
U.S. Bank Auto Loans are good options for used car loans. Starting rates for new, used, and refinancing range from 3.54% to 5.74%, and you can finance between $5,000 and $100,000. Business Insider editors give U.S. Bank Auto Loans a 3.5 out of 5.
Navy Federal Credit Union Auto Loans
If you want to use a credit union to fund your car loan, Navy Federal Credit Union Auto Loans is rated the best credit union option by Business Insider. New car rates start at 2.29%, with used starting at 2.69% and refinance starting at 2.29%. Navy Federal Credit Union allows you to borrow $250 to $500,000 and receives a 4.5 out of 5 from Business Insider editors.
PNC Auto Loans
If a new car is in your future, PNC Auto Loans could be the best place to get a car loan. New car rates range from 2.14% to 14.54% if purchased from the dealership, with new car purchases from a private party ranging from 4.64% to 21.04%. Lease buyout rates are from 3.64% to 20.04%, while refinance rates fall between 2.64% and 19.04%. PNC lets you borrow from $5,000 to $100,000 and has a Business Insider rating of 3.5 out of 5.
Whether you’re buying new or used, research your financing options to ensure you get the best value for your money. The best place to get a car loan will vary based on the age of the vehicle and your credit score, so your research will be time well spent.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.
