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If you’re not able to pay cash for the full price of a car purchase (or you prefer to keep your cash in hand), you’ll most likely need an auto loan. But when it comes to auto loan financing, you may not know what your options are, or which is the best lender for you. Especially if you have poor credit, your options may be limited.
We’re here to help you use data to get the lowest interest rates possible on your auto insurance, because when it comes to car loans, it’s all about the bottom line.
Car loans are loans that you can get in order to purchase a car. Here’s how they work:
Put down at least 10 to 20 percent to avoid being “upside down” on your auto loan. If not, consider purchasing gap insurance.
Here, we’ll explain the process of buying car loans from start to finish.
Whether you’re dealing with a bank, a credit union, or an online lender, make sure to ask the following questions when shopping for auto insurance:
When you’re approaching a lender to negotiate a car loan, make sure you have the following information handy:
The lender will want to verify your employment, home address, and credit score. Using this information, you can get preapproved for a car loan.
Here’s the average total loan and monthly payment amount from the third quarter of 2024 by credit score and car type.2
Credit score range | New Car Monthly Payment | New Car APR | Used Car Monthly Payment | Used Car APR |
---|---|---|---|---|
781 – 850 | $729 | 4.77% | $527 | 7.67% |
661 – 780 | $747 | 6.40% | $515 | 9.95% |
601 – 660 | $775 | 9.59% | $530 | 14.46% |
501 – 600 | $759 | 13.08% | $539 | 19.38% |
300 – 500 | $727 | 15.75% | $538 | 21.81% |
Once you have a sense of how much your loan will cost, it’s time to get preapproved.
Before you buy a car, you can get preapproved for a loan from a traditional bank, credit union, or online lender. Most lenders offer preapproval online or over the phone. The table below shows well-known lenders and their contact information:
Lender | Type of lender | URL | Phone number |
---|---|---|---|
Chase | Traditional bank | https://www.chase.com/auto/prequalified | 800-336-6675 |
Wells Fargo | Traditional bank | https://www.wellsfargo.com/auto-loans/ | 800-289-8004 |
Bank of America | Traditional bank | https://www.bankofamerica.com/auto-loans/ | 844-892-6002 for new customers, 800-215-6195 for existing customers |
Citigroup | Traditional bank | https://online.citi.com/US/ag/current-interest-rates/personal-loans-and-lines-of-credit | 877-362-9100 |
PNC | Traditional bank | https://www.pnc.com/en/personal-banking/borrowing/auto-loans.html | 877-CALL-PNC |
Navy Federal Credit Union | Credit union | https://www.navyfederal.org/loans-cards/auto-loans/auto-learning-center/preapproval.html | 888-842-6328 |
State Employees’ Credit Union | Credit union | https://www.ncsecu.org/AutoLoans/VehicleLoans.html | 888-732-8562 |
Pentagon Federal Credit Union | Credit union | https://www.penfed.org/auto | 800-247-5626 |
BECU | Credit union | https://www.becu.org/loans-and-mortgages/auto | 800-233-2328 |
SchoolsFirst Federal Credit Union | Credit union | https://www.schoolsfirstfcu.org/products/auto-loans/auto-loans/ | 800-462-8328 |
Capital One | Online lender | https://www.capitalone.com/cars/prequalify | 800-689-1789 |
Carvana | Online lender | https://www.carvana.com/financing-prequalification | 800-333-4554 |
Ally | Online lender | https://www.ally.com/learn/pre-approval/ | 877-247-2559 |
myAutoloan | Online lender | https://www.myautoloan.com/content-articles/getting-a-car-loan-pre-approved.html | 888-203-3130 |
Autopay | Online lender | https://www.autopay.com/ | 844-276-3272 |
The lender will run a soft credit check to see your credit report. A soft credit check, as opposed to a hard inquiry, is when a lender requests a copy of your credit report or checks your credit score. In contrast, a hard inquiry occurs after you’ve applied for a loan and could affect your credit score.3
A lender running a soft credit check won’t affect your credit score.
The soft credit check will tell the lender your personal credit rating, which will impact your chances of getting approved for a loan, your annual percentage rate (APR) or interest rates, and other crucial factors. We recommend getting preapproved through multiple lenders until you find the best terms. Sometimes, you have to have a specific car in mind to get preapproved. If you don’t get preapproved, there’s no point in applying for a car loan through that lender.
Note that not all lenders offer preapproval. Instead, you’ll have to apply for the loan directly, and the lender will do a hard inquiry (which, again, could affect your credit score).
Once you’ve gotten preapproved for a car loan, you can either put a down payment on the car you want directly or trade in your current vehicle.
Then, KBB will tell you its value, taking depreciation into account. You can compare this number to estimates from similar services like Edmunds, Carfax, or Autotrader. However, trade-ins only work for those who don’t have negative equity, meaning you owe more on the car than the trade-in offer. Otherwise, you’ll have to pay the lender the difference. While trade-ins are convenient, you probably won’t get as much for your car as you would if you sold it to a private party.
Negative equity means you have unpaid loans on your car. If you trade in your car, you’ll still be responsible for those loans.
The main types of car loan financing are direct financing — using a financial institution like a bank, credit union, or online lender — and dealer financing, where you pay the dealership directly. With direct financing, you’ll get a loan from a financial institution and pay the dealership for the car in full. Then, you’ll pay the bank in installments. In contrast, with dealer financing, you’ll pay for the car in monthly installments.
>> Learn More: Calculate Dealer Financing vs. Bank Financing
Type of auto financing | Direct | Dealer |
---|---|---|
Who you pay | Financial institution | Dealership |
When you pay for your vehicle | When you get the loan, and then you pay the financial institution in monthly installments | Monthly installments |
Shop around for the best interest rates? | Yes | No |
Convenient? | No | Yes |
Types | Bank, online lender, credit union | Dealer-arranged, captive finance, “buy here, pay here” |
Although it’s less convenient, we recommend direct financing so you can shop around for the best rates. With dealer financing, the advertised low interest rates may only apply to those with good credit scores, and you won’t be able to compare rates.4
Dealer financing can work a few different ways.
With direct financing, you can choose from the following financial institutions.
Maximum term length, APR minimum | 36 | 37-60 | 61-72 | 73-84 | 85-96 |
---|---|---|---|---|---|
New vehicle | 4.09% | 4.49% | 4.79% | 6.69% | 7.59% |
Used vehicle | 4.99% | 5.49% | 5.59% | N/A | N/A6 |
Or check out rates from the Sidney Federal Credit Union:
Type of loan and make years | Approximate term (in months) | APR |
---|---|---|
New and used cars, 2024-26 | 36 | 5.84% |
New and used cars, 2024-26 | 48 | 6.09% |
New and used cars, 2024-26 | 66 | 6.34% |
New and used cars, 2024-26 | 78 | 6.69% |
New and used cars, 2024-26 | 84 | 7.19% |
Used autos, 2023-21 | 48 | 6.59% |
Used autos, 2023-21 | 66 | 6.79% |
Used autos, 2023-21 | 75 | 6.89% |
Used autos, 2023-21 | 78 | 7.29% |
Used autos, 2023-21 | 84 | 7.49% |
Type of financing | Dealer-arranged | Captive finance | Buy here, pay here | Banks | Credit unions | Online lenders |
---|---|---|---|---|---|---|
Good for those with good credit? | Yes | Yes | No | Yes | Yes | No |
Good for those with subprime credit? | Yes | No | Yes | No | Yes | Yes |
As you can see, some financing options are ideal for those with subprime credit, while some are better for those with good credit. Do your research beforehand to find the lowest interest rates possible, and make sure to read the loan terms and conditions.
We’ve compiled the best auto loans for those with used cars, bad credit, new cars, and more. Read our pages below to find the loan you’re looking for.
Auto loan refinancing is when you take out a new loan with different terms to pay for an existing loan. People typically refinance an auto loan if they can find a lower interest rate elsewhere. This may be the case if your credit score has improved since taking out the original loan.
Shorter loan term: Your refinanced loan could be paid off sooner than your original loan.
Lower interest rates: Refinancing your auto loan could mean lower interest rates, which translates into lower monthly payments. However, refinancing doesn’t always result in lower interest rates, as you’ll see below.
More interest over the vehicle’s lifetime: Although your interest rate could decrease, you’ll pay more interest over the vehicle’s lifetime than if you hadn’t refinanced.
Higher interest rates for older cars: If your vehicle is older than 5-10 years (depending on the lender), refinancing could actually make your interest rate increase.
Clearly, there’s no one-size-fits-all refinancing auto loan, so if you have to refinance, make sure your interest rates are low. A good place to start is our list of the best auto loan refinancing or our refinancing calculator.
Depending on the lender and the type of financing, you may or may not be able to get an auto loan with bad credit. There’s no universal minimum credit score to obtain an auto loan, but clearly, the higher the score, the better the loan terms and interest rates.
If you have bad credit, we recommend getting auto loans from:
To lower your interest rates, we recommend improving your credit score before applying for auto loans. You can take these steps to improve your credit:
If you can’t improve your credit score, you may still be able to get an auto loan. Here are two ways to keep your interest rates to a minimum:
Maybe you don’t qualify for an auto loan because of your subprime credit, or maybe you don’t want to shell out the money for a down payment. An alternative to buying a car is leasing a car, meaning you pay to use it for a certain period of time or number of miles. With leasing, monthly payments will be lower than auto loan payments. However, you’ll have to return the car when the lease is up, unless the dealership lets you buy it.7
>> Learn More: Does it make more sense to buy or lease your next car?
A leased or financed vehicle typically requires comprehensive and collision coverage. Learn more about leased vehicle coverage and the cost of auto insurance.
Here are some quick numbers regarding auto loans and the debt can come with them:
Always do your research using an auto loan calculator before purchasing a loan. You can get preapproval from many credit unions or banks before purchasing a car. Remember, the higher your down payment, the lower your monthly loan payments will be.
Depending on your credit score, you may prefer direct or dealer auto financing. Several types of institutions offer auto loans, including banks, credit unions, dealers, and online lenders. Once you’ve committed to an auto loan and purchased a new vehicle, you can start looking for the best auto insurance policy.
How Does Financing a Car Work?. Experian. (2023, Sep 15).
https://www.experian.com/blogs/ask-experian/how-does-financing-a-car-work/
Auto Loan Rates and Financing for 2025. Experian. (2025).
https://www.experian.com/blogs/ask-experian/auto-loan-rates-financing/
Will Checking Your Credit Hurt Credit Scores?. Equifax. (2025).
https://www.equifax.com/personal/education/credit/score/will-checking-your-credit-hurt-credit-scores/
Car Financing Loans. New York City Bar Association. (2025).
https://www.nycbar.org/get-legal-help/article/consumer-law/automobiles/car-financing-loans/
Credit Union and Bank Rates 2024 Q4. National Credit Union Administration. (2024, Dec 31).
https://ncua.gov/analysis/cuso-economic-data/credit-union-bank-rates/credit-union-and-bank-rates-2024-q4
Auto Loan Refinancing: See Options and Today’s Rates. Navy Federal Credit Union. (2025).
https://www.navyfederal.org/loans-cards/auto-loans/auto-refinance-rates.html
Financing or Leasing a Car. Federal Trade Commission. (2025).
https://www.consumer.ftc.gov/articles/financing-or-leasing-car
2024 State of Auto Finance. Mercer Capital. (2024, Jun 21).
https://mercercapital.com/2024-state-of-auto-finance/