With prices for new cars skyrocketing and interest rates at their highest level in 15 years, Americans are having trouble affording a vehicle. In fact, the combination of rising prices and high rates is causing more people to fall behind on their car payments than at any time since 2009.
Several factors affect auto loan rates including credit score, where you shop for your vehicle and the term length of the loan. In general, those with the best credit scores get the most competitive offers on their loans because lenders view them as a low risk for defaulting on the debt. However, even borrowers with the lowest scores can find competitive rates if they are careful and shop around for the best deals.
The type of lender you choose also influences your auto loan rate, though to a lesser degree than your credit score. Shoppers can find a variety of lenders offering competitive rates, from banks to credit unions to online lending platforms and car dealership financing departments. However, the most important factor is to shop around and compare rate offers from multiple lenders. It’s possible to save thousands in interest charges by doing so.
To help make the process of finding and comparing rates easier, we’ve put together a list of starting rates for new and used vehicles from several lenders, including credit unions, banks and car dealerships. The list includes both national and regional lenders as well as some of the most popular online lending and aggregator platforms. It also includes rates for borrowers with excellent credit, as well as those with less-than-perfect scores.
As you compare car loan rates, keep in mind that the longer the term of a loan, the more you will pay in interest charges. Ideally, you should take out a loan with the shortest term that fits within your budget, as this will allow you to repay the loan sooner and prevent your vehicle from depreciating to a point where it’s worth more than you owe on it.
When shopping for an auto loan, be sure to apply for preapprovals from a variety of lenders so you can see which ones offer the most competitive rates and terms. Also, keep in mind that not all lenders report auto loan payments to the credit bureaus, so you may want to opt for a lender that does if you’re trying to improve your credit.
For those with the strongest credit, the best car loan rates are often available from the automakers themselves through their in-house finance and insurance arms. These rates can be as low as 0%, which can save you thousands in interest charges. If you have a great credit score, you can likely negotiate much lower rates through independent lenders or even your own bank. In addition to looking at rates, shoppers should consider incentives and financing deals offered by automakers when selecting a vehicle. The following are some of the most current offerings from car manufacturers.