The best car loans of January 2022
When it comes to buying a car, finding the right loan can be just as important as finding the right car.
It’s not as simple as showing up at the dealership. To get the lowest interest rate, you’ll need to shop around for an auto loan to see what type of financing is available to you. Dealerships often mark up interest rates on loan offers from lenders, which can cause you to pay more for the same car.
The good news is that it’s completely avoidable if you’re willing to shop around for your loan and get pre-approved before you start shopping at the dealership. To get the lowest interest rate, you’ll need to shop around for an auto loan to see what type of financing is available to you. (Keep in mind that the lowest interest rates will generally go to buyers with the best credit.) Once you start getting quotes, you’ll have two weeks to gather all the quotes you want without multiple inquiries won’t hurt your credit score – the credit bureaus count all such inquiries as one during this period.
Having pre-approved for a car loan can give you better bargaining power and peace of mind that you will have the lowest possible interest rate. When you start shopping, keep in mind that your small local bank or credit union could also be a great place to get a loan – these institutions often offer lower car loan interest rates than the big banks, but are generally limited to a relatively small geographic area. .
Here are some banks to help you start your search for a variety of situations.
Best Overall, Best for Leasing Buyouts: Bank of America
Bank of America currently has excellent rates for auto loans. Prices for a new car purchase start at 2.09% APR, and a used car can be as low as 2.29% APR. Bank of America is offering rate reductions for current customers, up to 0.5%.
If you want to buy the car you’re currently leasing, but need a loan to do so, Bank of America offers a loan for that. Bank of America offers a variety of auto loans, and like others, its interest rates are competitive in 2021. Lease buyouts may have higher interest rates than a new car or home loan. opportunity, but Bank of America’s lease buyout APRs start lower than the rates offered by other lenders.
Best for Great Credit: LightStream
If you have good or excellent credit, you might want to consider LightStream in addition to Bank of America. Part of SunTrust Bank, Lightstream focuses on auto loans to customers with good or better credit.
Because it focuses on a narrow subset of customers, its rates don’t go too high — For a 36-month loan for a new car purchase between $10,000 and $24,999, interest rates vary from 2.49% to 6.79%. However, borrowers with lower credit scores may find better rates elsewhere.
Capital One offers easy, reputable auto loans for borrowers with credit scores of 500 or higher. Capital One offers loans as small as $7,500 for used vehicles.
The Ally online bank does not offer financing for the purchase of a car. But, if you’re looking to refinance the car you already have, its Clearlane auto loan division offers competitive rates. As long as your vehicle meets the standards (less than 100,000 miles and less than 10 years old), this lender could offer a competitive rate as low as 3.99% according to NerdWallet. Clearlane also offers auto leasing buyouts.
Which lender is the most trustworthy?
We’ve looked at each institution’s Better Business Bureau score to help you make the best decision possible when choosing an auto loan. The BBB measures companies based on factors such as truthfulness of advertising, honesty of business practices and responsiveness to consumer complaints. Here is the score for each company:
The majority of our top picks are rated A or higher by the BBB, with the exception of Clearlane by Ally. Keep in mind that a high BBB score does not guarantee a good relationship with a lender and you should continue to research and talk to others who have used the company to get the most useful information. possible.
The BBB currently gives Clearlane by Ally a D- due to 53 complaints filed against the company, including one unresolved complaint. Due to lenders’ BBB scores, you may prefer to use another car loan company on our list.
Frequently Asked Questions
How were these winners determined?
These lenders were chosen based on interest rate (APR) for various credit scores, whether you’re buying new or used, and loans for a specific need like refinance or lease buyout. Insider collected data from NerdWallet, MagnifyMoney, and Credit Karma, as well as the lenders themselves. This list only considers loans available in most of the United States and does not include captive lenders – lenders owned by automakers.
The dealership I shop at offers financing. Should I just use this?
Car dealerships are allowed to mark up the interest rates on the car loans they offer, and they usually do. The interest rate offered by a seller often includes a discount for the dealer, which translates into a higher interest rate for you. While you might qualify for a 6% interest rate from a bank, you might see 6.5% or even 7% from a dealership, for example.
If you’re willing to work a little, you might be able to save by shopping on your own. The best way to avoid this problem is to get pre-approved from a few banks or lenders when you start buying a car, and take those pre-approvals to the dealership with you. Then you’ll have some estimates of what your cost of borrowing might be, and you can compare the lowest APR.
Does my tenure matter?
The longer the term of the loan, the lower the monthly payment. But, paying more than 60 months (five years) on your car loan could make you owe more than your car is worth.
Cars depreciate quickly, and if you pay more than five years on a car loan, your loan could end up in this situation, also known as “upside down”. As auto loan terms increase, auto loan delinquencies also tend to increase.
Get auto credit with bad credit? Here’s what you need to know.
If you’re shopping for a car loan with bad credit, you could benefit a lot by doing your research and shopping around when looking for a car loan. Avoid “buy here, pay here” financing, as these loans often come with exorbitant interest rates and high monthly payments, which could cause you to miss your payments.
A local credit union can be a good place to start if you have bad credit – sometimes lenders like these can be more lenient and offer lower interest rates than the big banks.