In early August 2021, President Biden signed an executive order stipulating that half of all new vehicles sold in the United States should be electric by 2030. So now might be the perfect time to get behind the wheel of one. green vehicle. If you’re buying an electric car, you may be able to save money by looking for a green car loan.
A green auto loan is a financing option for consumers purchasing zero or low emission vehicles. They often come with lower interest rates and several other benefits.
What are green auto loans?
A green car loan can be used to buy environmentally friendly cars – or cars with lower average emissions. These fuel-efficient cars generally fall into the hybrid or electric category and are available from many manufacturers, from Ford to Nissan to Tesla.
Green car loans entice buyers to consider these green vehicles by offering interest rate discounts, extended repayment terms and other benefits. These loans can make green vehicles more affordable for borrowers.
For example, Chevrolet offers a 3.49% APR for 60-month loans when purchasing its Bolt EV. Similarly, Ford is offering a 3.9% APR on loans up to 72 months for its Mustang Mach-E.
These rates are well below today’s average interest rates on new auto loans, which were between 5.4% and 5.28% in September 2022. But you’ll need to meet credit and other requirements to qualify for more. such offers.
What is a green car?
A green car is a vehicle that uses alternative fuel or electricity instead of gasoline or diesel, making them better for the environment. They have benefits such as lower carbon dioxide emissions, less maintenance, fewer fuel stops and quieter engines.
A 2021 study by the International Council on Clean Transportation showed that electric vehicles have the lowest greenhouse gas emissions of any car type. According to the study, the lifetime emissions of an average mid-size electric vehicle are 60 to 68 percent lower than comparable gas-powered cars in the United States.
The best green vehicles have a SmartWay designation, a score given by the US Environmental Protection Agency to vehicles with the lowest emissions for each model year. Many lenders use this designation to determine if your car qualifies for an economical green auto loan.
Yet green vehicles have a higher average initial price than traditional car options. Thus, many states encourage drivers to purchase these vehicles by offering tax credits.
According to Kelley Blue Book, the average price of an electric vehicle in the United States was $65,921 in September 2022. But not all electric vehicles will cost you that much, and some luxury models cost significantly more. For example, the starting price of a 2022 Nissan Leaf is $27,400, while the 2022 Tesla Model 3 starts at $48,490. Spending more than $100,000 on an electric vehicle is also possible. The Tesla Dual Motor Model X starts at $120,990.
Despite often higher prices, sales of electric vehicles are growing faster than sales of all other types of cars, according to KBB.
How do green loans differ from traditional car loans?
A green auto loan works like a traditional auto loan: you’ll apply for the loan through an auto lender, receive an interest rate based on your credit score, select a repayment term, and make regular payments with interest. during the term of the loan. However, the details of the two loans may be slightly different.
Green car loans generally offer lower interest rates than conventional loans, either through lower base interest rates or rate reductions. Because green vehicles can be expensive, many lenders offer longer repayment terms than conventional auto loans to lower the monthly payment.
Where they are available is one of the biggest determinants of green car loans. Unlike typical car loans, which you can get from banks and online lenders, you’re more likely to find a green car loan from a local credit union. The University of Hawaii’s Federal Credit Union, Vermont State Employees Credit Union, and Verity Credit Union all offer green car loans.
Additionally, some dealerships may offer green loans from the manufacturer. For example, Ford offers financing for its Mach-E model through local dealerships. Similarly, Chevrolet offers financing for its Bolt models through dealerships.
Why are green auto loans important in 2022?
Auto loans and green vehicles started gaining popularity in the early to mid-2000s, and they aren’t slowing down. High gasoline prices may help fuel demand, with the price per gallon averaging around $3.77 at the end of October.
According to Kelley Blue Book, Americans bought 67% more electric cars in the third quarter of 2022 than in the same period in 2021.
Several automakers have pledged to support the federal initiative and encourage the purchase of greener vehicles. Ford, General Motors and Stellantis (which owns Chrysler and Fiat) have pledged to increase production of electric vehicles.
Next steps and where to apply for a green auto loan
Before applying for a green auto loan, make sure your finances are in the best possible shape. Try to improve your credit score – lenders use your credit score, income and more to determine if you qualify for a loan and what rates they can offer you.
From there, you can shop around for your green auto loan. Comparing a few quotes before applying for a loan can help you get the best deal. Check out these resources to help you as you begin the car buying process:
- Plugstar: PlugStar is a particularly useful resource for car buyers early in the process. After entering your zip code and desired make and model, you’ll see cost estimates, available incentives, local dealership information, and the vehicle’s environmental footprint.
- EV lifespan: EV Life’s EV Climate Loan allows you to be prequalified with multiple lenders and automatically qualifies you for rebates and incentives, applying those savings upfront to your monthly payment.
- Credit unions: Local credit unions are one of the best places to start your search for a green auto loan. Credit unions like JetStream Federal Credit Union, Suncoast Credit Union, and MyPoint Credit Union offer interest rate discounts on auto loans for green vehicles. Ask your credit union about the options available when shopping for a car loan.
The bottom line
Purchasing an eco-friendly vehicle can pay off in several ways. You can reduce your carbon footprint, take advantage of tax breaks and save a lot on fuel costs.
Before applying for a green auto loan, research at least three lenders and learn about their eligibility criteria, incentives, and discounts. Get pre-approved so you can compare fees, interest rates and monthly payments over the life of the loan. Shopping around could net you a discount on a car loan that will save you hundreds or thousands of dollars.