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10 Best Auto Loans of 2018

We've looked through rates, loan options, applications, and real customer reviews to find the best auto loans. Get that car you've always wanted.
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Auto loans are loans used to either purchase a new or used car, or to buy out an existing lease. The borrower obtains a large amount of money from a lender, and pays it back over time in monthly payments with interest. The interest rate, or APR (annual percentage rate), affects what the monthly payment for the car will be. Until the last and final payment, the borrower doesn’t receive the title to the car or own it outright. Most people need an auto loan as they don't have the extra cash to pay for the vehicle upfront.

How Do I Get a Car Loan?

Getting a car loan seems relatively straightforward. You figure out how much you can afford to pay each month and how many years you want to be paying it. You shop around for the best loan deal you can find and get pre-approved. Then you pick out your car, finalize the loan, and drive away. Easy, right? Well, yes—if your only goal is to get any old car loan. But if you want to get a good car loan, there are a few more steps you should take that will save you money and keep you in control of the process.

  1. Start by reviewing your credit report and score. This will help you get a rough idea of what interest rate you’ll be charged for a loan. See if there are any negative or derogatory entries on your credit report that can be eliminated quickly to boost your credit score. Better credit = better APR.
  2. Take a close look at your finances. Your income and monthly expenses, rather than your desire for a cool new car, should drive your decision about how large a loan to seek. Some experts recommend that you spend no more than 10% of your after-tax monthly income on a car payment, but this rule of thumb is subject to a number of other factors. Do you live in an expensive city? What do your monthly bills look like? Are you buying a car that will be especially expensive to insure or maintain? Be conservative in estimating how much you can pay each month—and don’t forget to factor in insurance, maintenance, and fuel.
  3. Calculate how much of a loan you can safely afford, given your credit history, your income, and your expenses. There are a number of car loan calculators that make this process easy.
  4. Figure out how to make the largest down payment you can. Putting more money down will lessen the likelihood that you will be underwater on your car loan. A larger down payment may also reduce the interest rate you pay on your car loan and save you a great deal of money. 

Armed with this information, your next step is to shop for a loan. And “shop” is the right word here. An auto loan is a major purchase, one that you’ll likely pay thousands of dollars for. Treat it as such, not as simply a means to getting car of your dreams. Check with both the banks and credit unions you do business with, and also with those you don’t. Consider online car loans, especially if your credit is less than stellar. Also, make sure to ask yourself the following: Are there prepayment penalties? Are there origination fees? Can payments be made online? And—this is important—do all your loan shopping in less than two weeks. Why? Because credit bureaus knock points off your credit score every time someone does a “hard pull” of your credit history. But they treat a cluster of similar inquiries made within a two-week period as a single inquiry. In other words, they don’t penalize you for shopping around, so long as you do it quickly.

Be aware that many dealers may try to sell you a more expensive vehicle than is prudent for your budget. And they may also offer their own in-house financing deals to make it easier for you to buy a pricier vehicle. Typically, though, these deals that look wonderful in the salesman’s office come with longer payoff terms. And that means paying more interest. Not all dealer-assisted financing is a bad deal, of course. Sometimes dealers will have access to financing options that individuals do not. But be wary. A loan is only a better deal if it costs less over its lifetime.


Top 9 Companies

#1
Our Partner
9.6 / 10
  • Compare 150+ car loan refinancers
  • Get the best rates from lenders across the country
  • Over 300,000 loans funded
  • A+ with the Better Business Bureau
  • Save on auto, RV, Boat, home insurance as well!
#2
Our Partner
9.5 / 10
  • Refinance or purchase a new or used car
  • Their lenders have solutions for most credit situations.
  • Get up to 5 offers from competing lenders!
  • Complete simple and secure online form in minutes.
  • Save on your current or new monthly car payment.
#3
Our Partner
9.3 / 10
  • Low fixed rates with flexible terms
  • Rate loan calculator
  • Best loan experience guaranteed
  • Apply for an auto loan online
  • Online account management
  • Wide selection of vehicle loans
#4
Our Partner
9.3 / 10
  • Quick and easy online application
  • Get up to 4 offers in minutes
  • Auto loan refinancing
  • Dealership finder
  • Used cars up to 8 years old
#5
Our Partner
8.6 / 10
  • Get approved in minutes
  • Auto loans for new or used cars
  • Large network of auto dealers and direct lenders
  • Access to hundreds for potential loan options
  • No obligation and application fees
  • No minimum credit score required
#6
Our Partner
8.6 / 10
  • Quick, online pre-approval
  • All credit types accepted
  • Nationwide coverage
  • Connects you to a wide network of lenders
  • No down payment required
  • Subprime auto loans offered
#7
Our Partner
8.5 / 10
  • Apply for an auto loan in just 90 seconds
  • No minimum credit score required
  • Free, zero-obligation application process
  • Simple and secure online application
  • Get approved, even with bad or zero credit
  • Wide network of lenders available
#8
Our Partner
8.4 / 10
  • Simple and secure online application in 5 minutes or less
  • No obligation or fees to apply
  • Shop auto loan application across a large network of dealers
  • Secure financing for new or used vehicle
  • All credit types are welcome
  • Same day pre-approval
#9
8.3 / 10
  • Simple interest loans
  • Auto loan financing starts at 2.89%
  • Get access to funds in as little as 24 hours
  • Lease buyout and auto loan refinancing
  • High auto loan limits

How We Compare Auto Loans

Loan Options

35%

These days, whether you’re planning on buying a new or used car, the wide availability of auto financing options gives consumers increased flexibility, allowing them to compare multiple APR offers and term lengths. Generally speaking, cars are purchased via franchise dealerships, who have partnerships or networks of auto loan services they work with directly. Another option are private sellers, usually either local dealerships or individuals. Regardless, the main points to keep in mind when comparing the new and used purchase and refinance loan options of different providers include: minimum and maximum term lengths, minimum and maximum loan amounts, APRs, and down payment requirements.

Types of Loans Offered

Purchase Loans - Simply put these are loans to help you buy a new or used vehicle. They can be issued through dealerships, banks, credit unions, online entities, etc. It might come as a surprise to you, but some of these providers limit the car makes and models they finance. Some auto financing companies place restrictions on independent dealers or those not affiliated with an auto manufacturer. Also, when researching loans for used cars, be sure to check if the lender has any model, year, and mileage restrictions.

Loan Refinancing - This is a new auto loan with more favorable terms that replaces your current loan. Refinancing makes it possible for you to make lower monthly payments either by taking advantage of lower interest rates or extending loan terms.

Lease Buyout - This option allows you to purchase your leased car. This saves you from incurring fees and penalties when returning your car, including wear and tear, exceeding mileage limits, and other return fees.

Private Party Purchase - A personal loan to help you buy a car from an individual.


Application & Service

25%

Applying for an auto loan is just the same as for any other type of loan. Financial experts concur you should shop around for a loan before even looking at cars. Make sure to have a budget in hand, know how much car you can actually afford, and have an accurate picture of your credit health. As mentioned above, each application will entail a credit check, so in order for these checks to count as a single pull and not multiple ones, try and get all your loan applications ready within a two-week period.  

Most of the auto financing companies we review offer an online application or pre-qualifying portal for auto loan shoppers. This gives customers a convenient method of pre-qualifying for a loan. The entire process usually takes just a few minutes, and companies respond to qualified applications almost instantly. Other factors we looked at to judge a given provider's application and service features include:

Approval Time

Approval time refers to the period between completing and sending an application and getting an approval for a loan. Many companies offer pre-approvals, during which lenders verify everything you've told them. The average car loan approval time can be as little as 1 - 2 days

Fees

When taking out a loan, it's of utmost importance to verify each and every loan fee. When financing through a dealer, fees are usually included. If you've arranged your own financing, make sure that the dealer gives you the out-the-door price, and include that in the loan amount. Finally, when purchasing a car from a private party, you generally won't be able to roll the taxes and fees into the loan, because individual sellers aren't set up to collect taxes for the state.

Benefits/ Features

Different lenders offer different benefits and features to the consumer to make loans more attractive. Some of these include:

Online Rates / Application - Allows you to get a quote, compare rates, and complete the application process entirely online.

Pre-Approval/Soft-Credit Inquiry - Some lenders will use a 'hard credit inquiry' to determine your credit worthiness, and this has a negative impact on your credit score. Other lenders offer pre-approval for the loan using a soft-credit inquiry, which will not affect your credit, but allow you to verify that you are eligible for the loan before the hard pull.

Customizable Payment Deadlines - Lets you choose when your payments fall during the course of the month.

Deferred Payments - Allows you to defer payment for a bill and pay in installments.

Joint Loans - Offers the option of adding multiple borrowers.

Credit Bureau Reporting - Allows you to check your credit scores from at least one of the 3 major credit bureaus (Experian, Equifax, and TransUnion).

Auto Loan Calculator - An online tool to help you calculate possible rates and monthly payments based on variable information, like down payment, interest rate, and payment term.


Qualification

20%

Different lenders will have specific requirements for issuing loans, from minimum credit scores to other financial indicators. Before completing an application for a loan with any financial institution, it's important to make sure you meet their qualifications. Your credit score will always play a huge role in determining your eligibility for a car loan, and in ultimately figuring out how much it’s going to cost you. This can be a problem not only for those with less than ideal credit scores, but also for new professionals with little or no credit history. Other factors that most lenders will look at include employment history, income, residency status, age, and geographic location, as they may only offer loans within certain states. Another crucial element is the car itself, as some lenders won't offer loans for certain makes, or have a maximum age limit. 


Reputation

20%

A lender's reputation is always an important element in deciding which company to seek a loan from. Hearing from people who have actually gone through the process and can attest to customer service issues, billing and payment processes, clarity of information, and timeliness is essential to understanding what to expect once you become a customer yourself. One way to do this is to check the company's reviews on independent review websites such as the Better Business Bureau and TrustPilot. It must be said however, that often the most vocal customers are the most dissatisfied, and complaints must be sifted through carefully to separate a legitimate issue from a disgruntled customer.


What's important to know about Auto Loans?


What is a good interest rate on a car loan?

A good interest rate on a car loan will depend on your particular situation. Car loan interest rates depend on a series of factors, such as the borrower’s credit score, the length of the loan’s term, and the age of the car, but they typically range between 3% and 10%. The national average in 2017 for a 60-month loan was 4.21%, so this is a good starting point for judging whether an interest rate is too high, but keep in mind that rates can vary according to the market trends in your region. Some sources state that you should not accept an APR over 5.5% if your credit score is good. If your credit score is low, you can expect a higher interest rate on a car loan.

Can you get a car loan with bad credit?

You can definitely get a car loan with bad or no credit, though it is more difficult than securing a loan with good credit. Your credit score is one of several factors that determine whether you get a car loan and how much interest you will pay on it. In general, credit scores of 720 or higher receive the lowest interest rates. Conversely, a borrower with a credit score that is 550 or lower might get interest rates as high as 18%. However, it is still possible to get a car loan at an acceptable interest rate with bad or no credit. You can shop around for loans at different banks or financial institutions in order to increase your possibilities of a favorable interest rate. Taking out the loan with a cosigner with good credit might also help your chances, as well as making a higher down payment. If you do end up with a high interest rate, make sure to pay on time every month and pay more than the minimum. Once your credit score improves, the possibility to refinance the car loan and get a better interest rate might also be available.

What is the difference between a car loan and a lease?

When you take out a loan to purchase a car, the loan value is determined by the total cost of the vehicle, minus your down payment and the value of the car you trade in (if you have one). Interest charges apply, which are determined by the length of the loan term and your creditworthiness. At the end of the loan term, you become the owner of the vehicle.

When you lease a car, however, the monthly payment you make is only for the predicted depreciation of the vehicle at the end of the lease term (which is usually three years), plus fees and interest. That is, you only pay the difference between what the car is worth now and what it is expected to be worth by the time you turn it in. At the end of the loan term, you simply return the car to the dealership.

Lease payments are usually lower than car loan payments and you are able to get a new car every few years, but leases strictly limit the number of miles you may drive every year before paying a fee per mile once the lease ends—a downside if you live in a rural area or have a long commute.

By contrast, car loan payments tend to be higher (if you are not able to make a sizeable down payment), but it’s easier to qualify for a car loan if you don’t have good credit. Also, since you will own the car, you can apply the trade-in value of your vehicle towards a car loan should you decide to buy a new one.



Best Overall
Our Partner
9.6 / 10
  • Compare 150+ car loan refinancers
  • Get the best rates from lenders across the country
  • Over 300,000 loans funded
  • A+ with the Better Business Bureau
  • Save on auto, RV, Boat, home insurance as well!