Consumer Advocacy
What you need to know
Auto Refinance
  • Focus on the totality of the loan and not on monthly payments
  • Credit unions tend to have the lowest interest rates
  • Increase your down payment to reduce loan balances and interest rates
  • Get pre-approved to estimate your borrowing limit
Our Approach

How we analyzed the best Auto Loan Companies

Loan Details
The best companies offer various types of loans. We also chose companies with reasonable qualification requirements and flexible loan options, so that anyone can apply regardless of their situation.
Customer Experience
Auto loan companies should offer their customers the best experience possible, including solid customer support, ample educational resources, and various ways to contact them.
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We receive compensation from these partners, which impacts the order they appear on the page. That said, the analyses and opinions on our site are our own and we believe in editorial integrity.

Our Top Picks: Auto Refinance Reviews

Cars are an essential part of our daily lives; we use them for everything from commuting to work and taking our kids to school to visiting friends and family. For this reason, getting an auto loan shouldn’t be a decision that you take lightly. Whether it’s a new or used car, chances are you’ll have to get an auto loan to finance the purchase of your vehicle, which is why you need to be aware of all the options available to you and know how to find an auto lender that fits your needs. With this in mind, we evaluated each company on our list based on the following factors.

This site does not include all companies or all available offers. Companies listed below are listed in alphabetical order.

 

Auto Approve review

Best for Personal Service

As an auto loan refinance marketplace, Auto Approve helps you find refinance options for your auto loan. What makes this marketplace unique is their focus on offering a personal experience through a dedicated personal consultant. This helps to significantly cut down on the thing that you may dread about auto loan refinancing--having to complete a small mountain of paperwork. That alone is a major benefit to consumers.

The consultant will guide you through the loan process, offering personalized advice, options, and rates based on your circumstances. Once you decide on what lender option works for you, they’ll deliver your complete loan package, pay off your previous loan, and take care of all of the DMV paperwork for you.

 

Screenshot, Auto Approve website, February 22, 2023.

Additionally, Auto Approve offers loans for other motorized vehicles, including trucks, SUVs, RVs, motorcycles, and boats. A minimum of $2,000 monthly income is needed to apply, and your vehicle can’t be older than ten years and must have less than 100,000 of mileage to qualify for refinancing.

Resources

Auto Approve's website has an FAQ section and a calculator that allows people to estimate how much they could save by refinancing their auto loan. In addition, the company publishes an extensive blog of interest to people who are looking to refinance their car loans and even drivers in general. Articles discuss sucn topics as leasing versus buying a car, auto insurance, and how to manage credit.

Auto Approve is not a direct lender and works with dozens of lenders to find customers their best refinancing deal. The company doesn't provide a list of its partner lenders, but that's due to the fact that lenders are always under review and the list may grow or shrink frequently.

 

Auto Credit Express review

Best for Bad Credit

As the best option for customers with bad credit, Auto Credit Express connects you with dealerships nationwide that can tackle your bad credit, either through their own finance department or through an indirect lender. The application process takes around three minutes, asking personal information and performing a soft credit inquiry. Once Auto Credit prequalifies you, they send the information to partnered dealers around your area who perform a hard credit pull. 

 Screenshot of Autocreditexpress.com's highlights. August 19, 2019.

Depending on the company you’re matched with, the lender can ask for additional information that includes proof of income (at least $1,500 per month), proof of residency with a current utility bill, proof of employment history (at least three years), proof of a working landline or cellphone under your name, and six to eight references with their personal information (names, addresses, and phone numbers). If a lender approves your loan, they can also ask you to include a down payment of at least ten percent of the car’s selling price.   

Excellent Blog and Video Resources

Auto Credit Express offers excellent resources, ranging from basic tools like car loan estimators and payment calculators, to more in-depth material such as blog articles and videos. The company’s blog has over a thousand articles that deal with different subjects, including bad credit auto loans, bankruptcy, car buying, car maintenance, credit repair, and leasing. While some of these blog posts are simplistic and generic, most are comprehensive and offer specific advice. Additionally, the website has more than 100 videos that deal with various topics including credit terminology and how to get a bad credit auto loan. It also offers a monthly newsletter that includes articles, resources, products, and auto loan advice. 

Capital One review

Best Bank

Capital One is the best bank option for auto loans thanks to its low APR, versatile loan term options and loan amounts. Loans start as low as 4,000 and have no maximum, since the loan itself depends on the vehicle you choose. Refinance has different parameters, with $7,500 loan minimum and a $50,000 maximum. Term lengths range from 24 months to 74 months, a flexible range that gives customers the option to make the payment that best fits their needs. APRs vary between new and old cars, starting at 3.99% for new cars and 4.53% for older models. Additionally, although Capital One’s loan types are limited, offering only single, joint, and refinance loans, they don’t require a hard credit pull until you actually contact a dealer after pre-approval.

Easy Pre-approval Process

Capital One’s 5-step questionnaire, makes it easy to get your auto loan pre-approved, simply answer a few personal questions that include name, physical address, date of birth, and social security number.  If you qualify for pre-approval, you can then search for the car you want from their list of 1,042 participating dealers across the United States. The pre-approval terms only work for 30 days, so if you miss the deadline, you’ll have to apply again. 

Bear in mind that even if you qualify, it doesn’t mean that you’ll get financing. Additionally, Capital One does consider personal income when issuing auto loans, so if you don’t have at least $18,000 in annual income ($1,500 per month) you won’t qualify for their pre-approval process.

Excellent Resources and Customer Support

Capital One’s website has ample resources you can use to familiarize yourself with the car industry. Their auto learning center has a large list of articles that are updated monthly and are divided into categories that include managing your money and getting the best deals. Capital One also has an FAQ section with detailed answers and online tools that include a car payment calculator and a car finder that lets you look up cars near you from up to 42 makes.

 

Screenshot of CapitalOne's Learning Center. August 19, 2019.

Additionally, Capital One has the fastest and most helpful customer support out of the companies on our list. Their representatives were knowledgeable and answered all our questions promptly, and constantly asked if we had any questions. 

Drawbacks

One major drawback about Capital one is that they only offer new and used car loan options for individual and joint borrowers. This means that customers wanting to apply for other types of auto loans, like private party and lease buyouts, won’t be able to do so with Capital One. Additionally, since financing is exclusive to participating dealers, there is less room to shop around, especially if you live in states like Arizona and Louisiana, who only have two dealers. Also, there are 15 states where there aren’t any participating dealers at all.

We must also mention that Capital One was hacked on July 19, 2019, leading to the leak of sensitive information from approximately 100 million US customers and 6 million Canadian customers. Although Capital One quickly notified federal authorities and has since invested more in cybersecurity, it goes to show that even big banks like Capital One aren't completely safe from hacking. 

Caribou review

Best Aggregator

Caribou is an auto loan aggregator that partners with lenders with the goal of providing a one-stop shop for competitive auto refinancing loans. They allows users to check rates for free without impacting your credit score by submitting a soft credit inquiry, with no need to submit your social security number.

Caribou refinances all passenger vehicles, from cars to trucks to SUVs. The company usually present pre-qualified offers within minutes of you submitting your free quote request, and claims you could save more than a hundred dollars a month.

The company has a wide range of ways to contact them for live assistance, including toll-free numbers, e-mail, and a live chat option with which you can get answers to frequently asked questions through a bot or begin chatting with a representative within minutes of requesting it. This helps the company help you find the best auto refinance loan for your particular situation.

Caribou enjoy an A+ rating from the Better Business Bureau and is accredited by the institution. The company also  is a verified company and has received a high rating from Trustpilot, receiving a 4.2 out of a possible 5.

For those looking to compare rates from different loan companies in a fully online process, Caribou makes it as easy as possible with a good interface and dedicated live chat with quick response time. For auto refinance loans, it is hard to beat the ease and speed of Caribou.

Carvana review

Best Online Lender

Carvana stands out from the online auto loan crowd for selling vehicles themselves and offering premium cars at cheaper prices, all without extra or hidden fees. The company’s website has a catalogue of used vehicles you can browse, complete with detailed information about each vehicle, including sales price, VIN, equipment details, accident history, and safety rating. 

If you decide on a vehicle or if you want to check if you pre-qualify for an auto loan, you can fill in their auto loan form, which Carvana uses to do a soft credit inquiry. Once complete, Carvana will provide competitive rates that are valid for 45 days. Carvana’s pre-approval qualifications are straightforward, requiring you to be at least 18 years or older, have at least $10,000 of yearly income and have no active bankruptcies.

Third-Party Financing and No Payment Penalties

If you’re interested in one of Carvana’s cars but don’t want to take a loan with them, you have the option of financing the vehicle through a third-party lender. Carvana supports almost every bank or credit union, with the exception of Capital One, Road Loans, and Car Finance Capital. Unfortunately, the company only finances single-buyer loans, so customers with low credit scores or low incomes won’t be able to benefit from a co-signer. Also, Carvana doesn’t charge any prepayment penalties, so you can pay off your loan sooner without any worries.

Convenient Customer Experience

Carvana offers a convenient customer experience, since all of their used cars come with a 7-day money-back guarantee. This means that if you aren’t satisfied with your purchase for whatever reason, you can return it in seven days for a full refund. Additionally, all cars come with a 100-day, 14,189-mile limited warranty that covers the repair and assembly of most of your vehicle parts, with the exception of interior or exterior cosmetic imperfections, parts that wear and tear through time, and regular maintenance, such as oil and engine tune-ups.

 

 Screenshot from Carvana’s Pick Up section. August 19, 2019.

If you’re interested in a vehicle but live outside of Carvana’s service area, the company is willing to help you out. If you have to book a flight to get your vehicle, Carvana will subsidize up to $200 of your total flight cost. Also, if you want a vehicle delivered to a specific center (called “Vending Machines”), Carvana will arrange for white glove transportation, meaning the vehicle will receive the utmost care when being transported. Customers can also rely on Carvana’s customer support, available 7 days a week from 8 AM to 9 PM EST through chat and over the phone. 

Drawbacks

Carvana’s greatest downside is that their services are only available in 22 cities across the United States: Atlanta, Nashville, Charlotte, Houston, Austin, San Antonio, Frisco, Raleigh, Jacksonville, Tampa, Birmingham, Orlando, Gaithersburg, Tempe, Warrensville Heights, Philadelphia, Indianapolis, Bridgeville, Oak Brook, Kansas City, and Greensboro. This limits their availability and, although it’s great that Carvana does its best to extend their services to interested customers, it still might not be enough if you have limited income and can’t afford to travel. 

Finally, if you’ve made up your mind about a specific vehicle at a dealership, you won’t be able to use Carvana’s loan services, since their financing only applies to the vehicles they sell.

GM Financial review

Best Captive Lender

GM Financial stands out from other competitors on this list by offering car loans for personal and business use. The company offers lease buyouts to purchase cars of GM’s make, which includes Chevrolet, Buick, GMC, and Cadillac. GM Financial also lets customers lease vehicles, and has a unique business lease program called The Right Lease®, which offers cheaper leasing costs for businesses and adds extras like reduced maintenance costs. 

You can get pre-approved for an auto loan by filling out their online form and stating the model you’re interested in and its year, make, and trim. After you fill in your physical address, GM Financial will map out all the dealers in your area with the selected car, and if you’re satisfied with the vehicle, you can submit your application for pre-approval. If GM Financial pre-approves you,  you can then go to the dealer to complete the purchase.  

Auto Loan Calculators and Helpful Resources

Among the captive dealers that we vetted, GM Financial had the best resources for customers, including a blog with articles that's updated monthly, and covers more than 15 loan-related topics. Additionally, the company has its own loan payment and affordability calculators, as well as instructive video clips.

 

Screenshot of GM Financial’s financial articles’ section. August 19, 2019.

The most useful tool is the dealer finder, which allows you to search for and locate all the certified dealers in your area. Other resources include a budgeting worksheet and a credit education brochure (both downloadable).

Drawbacks

Since GM Financial is a captive lender, it only offers auto loans for vehicles of the General Motors make.

However, GM Financial’s greatest drawback is that their website doesn’t show, offer or promote any specific data regarding their auto loans, leaving you to guess minimum APRs, loan amounts, loan terms, and income requisites. We called the company to ask about this issue and the service representative we spoke to stated that, “we can’t inform a set number due to the various rates and terms that our dealers offer.”

Since loan amounts and APRs depend on the GM dealer that you choose, you’ll have to do a little shopping around through nearby dealers to get the best rates.

LendingTree review

Best Marketplace

LendingTree stands as one of the best auto loan marketplaces, offering a variety of loan types for new and used cars, Recreational vehicles (RV’s), and motorcycles, as well as auto loan refinancing and lease buyout agreements. 

Screenshot LendingTree's auto rate comparison widget. August 19, 2019.

Through LendingTree, customers will also find flexible loan amounts and APR rates thanks to their large list of partners (91). APR rates and loan amounts vary by lender, with loans starting as low as $1,000 and capping at $300,000, the highest in this list. Term lengths also vary by lender, although most offer from 12 months to 84 (seven years). Since LendingTree doesn’t offer rates directly, their services are completely free.  

Easy Qualification Process

To qualify for LendingTree’s auto loan services, customers need to answer up to twenty-six questions ranging from the type of loan they're looking for to personal information such as their name, physical address, and phone number. After completing the online questionnaire, LendingTree will share your personal information with their partners and match you with up to five lenders who will provide you with rate quotes by email, phone or text message. 

Excellent Resources and Customer Support

One of LendingTree’s best features is their helpful resources, which include an auto loan calculator, a car deal searcher, and auto lender review articles. The auto calculator helps you estimate payments, including title and registration fees, total sales taxes, and total interests, while the car deal search tool lets you explore deals on new cars in your area from up to 16 makes. Auto lender reviews are found on the resource section of their website and include reviews from various lenders, including some found on this list. Finally, LendingTree also offers useful articles to help customers get a better understanding about the car loan process.

Drawbacks

Although LendingTree is free to use, the marketplace has its share of drawbacks. First, unlike all other marketplaces on this list, to use their services (even their car deal searcher), you have to create an account with LendingTree. This might not be a problem for some customers, but it could be for many who would prefer to receive quotes without having to subscribe to a marketplace’s services. 

Also, it’s important to note that LendingTree is one of two marketplaces on this list that makes a hard credit inquiry when you request rate quotes.  Marketplaces usually use a soft credit pull to check your credit score and match you with partners, but LendingTree is an exception. The company doesn’t explain why they need to do a hard credit pull, although they state that the lenders you’re partnered with can also request a hard credit inquiry.

myAutoloans review

Best for Cursory Information

Customers looking to get the gist of what an auto loan entails, including information on financing, APR ranges, and no-credit car loans, can click on MyAutoloan’s articles and read them in less than three minutes. This is helpful for customers who want to know about a topic on-the-go, or who want a quick refresher about a certain subject.

Additionally, My Auto Loan’s resource center has other useful resources, including an auto loan finance glossary and guides for financing your car and improving your credit. The website also has calculators to estimate loan and payment amounts, as well as interest rates.

 

Screenshot of a helpful article from MyAutoloan.com. August 19, 2019.

5 Types of Auto Loans

My Auto Loan’s lending partners offer five types of auto loans: new and used auto loans, private party, refinance, and lease. MyAutoloan is the second marketplace on this list that does a hard credit pull on your credit score to match you with partners, so keep this in mind before applying. When you’re matched with partners, you’re provided with up to four offers, one less than most other marketplaces on this list.

The minimum loan amount My Auto Loan offers is $8,000, while the maximum depends on the lender. APR rates also depend on the lender, so the better your credit score, the lower your rates will be. My Auto Loan’s term lengths are among the lowest, with a minimum of 24 months and a maximum of 84 (7 years). However, to apply, you need a minimum income of $1,800 a month and you can’t have a current bankruptcy.

PenFed review

Best Credit Union for Auto Refinancing 

One thing that banks and non-traditional lenders have in common: they're for-profit companies that are under no obligation to put their customers' interests first. Credit unions, on the other hand, aren't subject to corporate earning mandates and other profitability standards. They're pledged to the well-being of their members and, as a result, can be a great resource for low-priced financial products of all kinds, from checking accounts to auto loans. When you seek to finance or refinance an auto loan through PenFed, you're required to become one of the credit union's members. And with membership, come privileges, including access to the more favorable loan terms credit unions often offer.

Broad Range of Loan Options

Some auto refinancing companies don't want to bother with loaning small amounts of money. But even auto owners who don't have a huge loan balance may want to refinance. At PenFed, car owners can finance as little as $500. That's not to say the credit union leaves fancy car drivers out in the cold: you can finance up to $100,000 through PenFed. You can also refinance 100% of your auto debt. In addition, the company offers flexible loan terms of up to 84 months, exceeding the maximum loan length of some other lenders. PenFed will refinance both new and used car loans and offers purchase financing for both vehicle categories.

Screenshot from penfed.org 2/22/21

 

Interest Rates and Qualification Requirements

PenFed provides a "rates as low" figure on its website. The loan you're offered by the credit union may not reflect that rate, of course, since many factors go into determining loan offers. But if you know the amount of loan you want to borrow, the loan term you prefer, and your credit score, you can use the loan calculators PenFed provides to get a ballpark estimate of your loan payment.

Like traditional banks, credit unions have to limit the risk involved in lending money. But because they may not be subject to the same strict return on investment requirements traditional banks must meet and, again, their focus is on serving their members, sometimes credit unions are a good choice for borrowers whose credit scores may not be something to write home about. PenFed doesn't list any minimum credit score qualifications on its website, but if you've had a hard time being approved for a loan, you may find it easier through PenFed.

Customer Experience and Reputation

PenFed's website is well-organized and it's easy to navigate to the auto refinancing information you need. The credit union offers an entirely digital loan application process, but doesn't speak to the length of time between application and approval on its website. As previously noted, you must be a PedFed member to apply for a loan. It's not quite as simple as filling out a form, though. You must also open a PenFed savings account. The minimum opening deposit is only $5, but this requirement may deter some borrowers.

PenFed receives an A+ rating from the Better Business Bureau. Trustpilot users give the credit union a rating of 3 out 5 stars, which is considered average by that organization's standards. PenFed appears to be diligent about responding to customer complaints and there are just a few of them registered with each rating organization. Many of these complaints concerned products other than auto refinancing, as well.

RefiJet review

Best for Refinance

The second marketplace on our list, Refijet focuses on connecting customers with companies that provide refinance and lease buyout loans. The service includes refinance loans for autos, motorcycles, and RV’s. Refijet is free and doesn’t require a minimum credit score to apply, although it specializes in customers with a credit score of at least 600. 

To qualify for refinance, your vehicle must be 10 years old or newer and have less than 150,000 miles. Loan amounts range between $10,000 to $150,000, and APRs range between 2.99 to 17.99, depending on your situation. Their term lengths aren’t the shortest on this list, starting at 36 months (3 years) and averaging around 60 months (5 years), and can go as high as 60 months (8 years).  

Simple Online Application Process

Applying for a quote is easy, just fill out your personal information and submit the online form. The company estimates interest rates using a soft credit pull, so your credit score is not affected. Refijet will then analyze your information to offer you the best finance options from their refinance partners. If you select one of these offers, Refijet will fill in all the paperwork and submit it to the lender of your choosing. The process takes less than a few minutes, although the length of time it takes to get your loan will ultimately depend on the lender you choose.  

 

Screenshot of Refijet.com's application form. August 19, 2019.

Drawbacks

Although Refijet has a thorough online FAQ section on their website, they offer the least amount of customer resources on this list.  The only options available on their site are an auto loan calculator and a solution center that does nothing more than redirect you to their online form. 

Our Research

More insight into our methodology

With car prices on the rise, leaving the car loan process to chance could spell danger for your bank account. Because you probably want to get an affordable loan with reasonable terms, you need to know the ins and outs of the auto loan process, including how to pick the type of lender that works best for you and find rates that fit your budget. 

Loan rates vary from person to person and are based on a variety of factors —your credit score and car make, for example — so there isn’t a set way to determine the best interest rate for you. However, after spending more than 200 hours researching the auto loan industry and using more than 30 resources, we narrowed down two factors that can help our readers find lenders that work for them: loan details and consumer experience.


Loan Details

Start by focusing on your loan details, including loan type, qualification requirements, loan amounts, and loan terms. Each lender offers different loan terms, so you need to pin these down before approaching one for pre-approval. 

Loan Types  

Since there are a variety of auto loans available, companies need to offer at least two or three of them to attract different kinds of borrowers. Typically, a car loan is a secured loan, meaning that the lender uses the car you’re buying as collateral, seizing it if you’re unable to pay the loan. However, there are different secured loans available in the auto loan market, including:

  • New auto loan: These loans are taken by borrowers to finance a new car purchase. Although it depends on the lender, a new auto loan won’t necessarily need a down payment. Minimum loan amounts, APRs, and term lengths are usually lower than for other auto loans, although this will also depend on your credit score and the vehicle you buy.

  • Used auto loans: These types of loans are the opposite of new auto loans, requiring higher loan amounts, APRs, and term lengths. Most used auto loans need a down payment, which can be higher for customers with low credit scores. 

  • Lease Buyouts: You can use this loan to buy the car you’ve been leasing once the lease term ends. If you’ve gotten attached to your leased car and feel that you won’t need additional financing, this might be an option for you.

  • Auto Refinance: Customers who can’t afford the loan’s monthly payments can negotiate their interest rates through a loan refinance. This increases the term length of your loan but can lower your monthly payment and interest rates, meaning that, though you’ll be paying more in the long run, it will be easier to afford. Auto refinance is an excellent option for customers who’ve taken out an auto loan with bad credit and have since improved their credit score, as refinancing their loan can help them get better rates. 

  • Private party auto loan: also known as person-to-person auto loans, these loans help you buy a car from an individual, also known as a private seller. If you’re approved, the lender pays the private seller, and in turn, you pay the lender over a set period. 

Qualification Requirements

Not all lenders have the same requisites to qualify for a  loan. Because not everyone has a great credit score, we looked at companies with flexible credit requirements. Of the companies that we vetted, the most common requisites were to be 18 years of age and have an average minimum monthly income of $1,500 or $1,800 ($18,000 and $21,600 a year, respectively). Most of the companies on this list don’t require a high Fair Isaac Corporation (FICO) score, meaning more borrowers could qualify. 

Loan Amount & Term Lengths

Depending on the car you’re buying, you might need a smaller or larger loan, so companies should be flexible in the amount they're willing to lend their customers. Similarly, companies should offer flexible loan terms, as this gives you the option of either pay your loan off quickly or take your time. Through our vetting process, we chose companies that issue loans of $8,000 or lower, and offer a maximum loan amount of $150,000. We also added marketplaces to our selection, since they have a variety of partners offering different types of loan products. 

Readers should know that, unless a company clearly states that they’ll do a hard credit pull on your FICO score, all online rates that you’re shown are based on a soft credit pull and are therefore estimates. Soft pull rates are pretty accurate, but the final rates you get may change once the lender does a hard credit inquiry. Also, a single hard credit pull can lower your credit score by up to five points, but credit bureaus will count several pulls as only one if done within 14 days after the first.


Customer Experience

Helpful information about Auto Refinance

Auto Loans 101

Buying a car seems like a  pretty straightforward process: you find a car that you like, you get a loan to finance it, and you set the time frame to pay off the loan. But there are a few key concepts you need to keep an eye on to get the best possible loan rates. The auto loan industry has seen consistent growth over the last 10 years with no signs of slowing down, but so has the number of borrowers who’ve failed to pay their loans on time. To avoid falling into this category, you should familiarize yourself with the industry as much as you can, including crucial factors like credit scores, costs, and where to shop.

So, how do auto loans work?

Key Factors

To qualify for an auto loan, lenders first assess how much of a risk they'll be taking on by financing your loan. They do this by checking your credit score (or FICO score), your credit history, your income, the loan amount in relation to the car’s value (loan-to-value ratio), and your debt-to-income ratio. If all checks out, chances are the lender will offer you the loan. This doesn’t mean that people with a spotty credit history won’t qualify, but they’ll have to take extra steps to assure lenders that they won’t default, including paying higher interest rates and down payments.

Costs 

There are many factors that will influence the cost of your loan. Here are the main elements that you need to keep an eye on:

Credit Score: Your credit score is the main factor that determines the interests of your loan and your annual percentage rate (APR). Interest rates differ from APR in that they only show how much you’d be paying each year for your auto loan, while APR rates include this information plus all other additional fees that are added to your loan balance. Therefore, an APR rate measures more accurately how much you’ll pay over the life of the loan. Credit scores range from 300 (very low) to 850 (very high), with fair to good scores ranging from 580 to 670. When it comes to credit scores, the higher your score, the cheaper your interest rates will be.

Loan term: Term lengths are very important when it comes to a loan’s total costs. Choosing a shorter term means that you’ll be paying your loan balance faster, so monthly payments will be higher than if you chose a longer loan term. However, even if you’re paying more each month, you’ll be paying less in the long run with a short-term loan, since they incur less interest. Longer loans are less expensive monthly, but depending on how long the loan is (like a 6-year loan for instance), you can end up paying thousands more for your car than you would with a shorter term.

For example, say that you’re in Texas and want to take out a $35,000 auto loan, and you’re considering a 36-month loan term (3 years) or a 72-month term (6 years). You have a good credit score (650) and you’re not considering a $5,000 down payment. With an average APR rate of 4.10%, you’d be paying $881.22 per month which, although expensive for a monthly payment, would result in $1,921 of total interests.

However, with a 6-year loan, your monthly payments would be reduced to half at $467.63, but you’d pay $3,867 in total interest fees, more than double than you would with a 3-year loan. Therefore, even if you’re paying more per month with a 3-year loan, you will be saving way more in the long run. If you want to know how much you’d be paying for your auto loan based on your own circumstances, you can always refer to an auto loan calculator. 

Additional factors: Although few, other factors could influence the cost of your loan, most notably the area and state you live in. Depending on where you live, your car loan costs could increase by hundreds if not thousands of dollars.

Where to Shop

You can get an auto loan from different types of lenders, each with their own advantages and downsides. Not all lenders work for everyone, although banks are typically the go-to lenders for most. Additionally, not all lenders of the same type are the same, since one bank might charge lower or higher rates than others. The best way to find out if a lender is right for you is to shop around and ask for estimates. To give you a head start, we’ve organized a list of all the types of lenders available:

Banks: The traditional go-to lender to get a loan, banks are for-profit organizations, meaning that their main objective is to make money. For auto loans, banks usually charge higher interest rates than credit unions. 

Credit Unions: Credit unions are the opposite of banks, working as non-profit organizations and focusing on benefiting their members. Credit unions might not have the same strengths as banks (their physical locations are scarce, for example), but they offer great benefits for members, most notably lower interest rates. A credit union’s biggest drawback is that you need to become a member to benefit from their services. However, some credit unions have easier requisites than others, so a little research can help you find the credit union that’s right for you.

Captive Lenders: These types of lenders stand right behind banks in the auto loan business, beating them on auto loans for new cars. These lenders are subsidiaries of major manufacturers like Toyota, Chrysler, and Fiat, and they only offer financing for cars of their own brand. Captive lenders can be a great option for customers with high credit scores since they receive very low interest rates on car loans and leases. Additionally, since their parent company funds the loans directly, they can even offer deals for customers with bad credit.   

Dealers: These lenders work similarly to captive lenders, although they offer their own financing or do so through a third-party bank or credit union. On the plus side, since dealers will do all the loan paperwork for you, financing a car with them means that you won’t have to go from place to place handling all the responsibility yourself. Additionally, dealers usually offer better loan terms for older vehicles, since banks and credit unions only have good rates for newer cars. On the downside, since dealers are looking to make a profit from loan sales, they usually offer more expensive interest rates than all the other options on this list. Additionally, they might try to sell you extra add-ons that you don’t need, like extended warranties or tire protection.  

Tips for Success

Since auto loan interest rates aren’t the same for everyone, you need to do all you can to get the best rates. Here are some helpful steps to achieve this goal:

Know your budget: Before getting an auto loan, you must first know how much you can afford per month for the car you want, taking into consideration your yearly budget after taxes, your monthly expenses, and any debt that you currently have. A great budget rule is the 50/20/30 rule, which says that you should spend 50% of your budget on necessities (insurance, loans, etc.), 20% on savings, and 30% on non-essentials.  

Buy a car that fits your budget: Although that fancy Camaro is breathtaking, you shouldn’t finance it if you can’t afford it, even if you get better monthly payments by extending your loan term. Aim to get a car that works for you and your actual needs, not one that blows your bank account and puts you into debt for debt’s sake. 

Choose the best rate possible: Since interest rates vary so much by person and lender, you need to shop around to get the best possible interest rates. Go to a company’s website, get a quote, and see if you pre-qualify for a loan. Although there is no limit to how many companies you could get a quote from, getting three to four quotes will help you pin down your average interest rate.

Get pre-approved: If you have a good credit score, there’s a high chance that your auto loan can be pre-approved by a lender. Getting pre-approved means that your credit score checks out and that they’re willing to finance your car, giving you a loan estimate that includes loan terms, interest rates, and borrowing limit. Getting preapproved is helpful for various reasons, including setting up your loan budget and giving you realistic expectations about what you can buy.

Get lower term lengths: you should always try to get the lowest term length possible for your loan since lower term lengths result in faster payment and lower added interest fees. 

Increase your down payment: Although not everyone can afford a high down payment, getting one can be beneficial since it decreases your overall loan and your interest rates. If you owe less, you pay less for it, so always try to put a substantial dent on your loan and reap the benefits in the long run.

Low Credit Score? No Problem!

Even if you have a bad credit history, you shouldn’t be discouraged from getting an auto loan. First, there are companies out there that focus only on offering auto loans for customers with low credit scores, so you can rely on them for a quote and pre-approval, or you can even contact them for financial advice.

You can also improve your credit score before applying for a car loan. Your payment history amounts to 35% of your credit score, so if you focus on paying your bills on time every month, you will slowly build up your credit score. You can even apply for a low-credit, high-interest car loan and improve your score by never missing a payment. The best thing about this strategy is that once your score improves significantly, you can negotiate a better interest rate by refinancing your loan.  

Finally, you can also look for a cosigner with a higher credit score. When a person cosigns a loan with you, they don’t share ownership of the car you’re buying, but they agree to become accountable if you ever fail to pay your loan. There are benefits and risks to cosigning, so you should discuss these thoroughly with your cosigner before reaching an agreement. 


What to Watch Out for When Buying Auto Loans

If you're in the market for the best auto loan deals of the year, here are some things to keep an eye out for:

Be Careful with 0% Interest Financing Deals

If it seems like it’s too good to be true, it usually is. 0% interest offers aren’t a scam, but they also aren’t the easiest to qualify for, since you need an exceptional credit score (800 or higher) to be considered. Car dealerships usually promote these offers on newspaper articles and billboards without listing this disclaimer, hoping to attract as many customers as possible. Also, 0% interest deals have their own pros and cons, so remember to examine them and to make sure this type of loan is the best choice for you. 

Avoid Long Term Loans

Not everyone can afford short term loans, especially those with low credit scores and low income. Shorter loan terms that last 12 or 36 months, for example, lead to higher monthly payments, which is why borrowers usually prefer longer terms to pay off their loans. However, this doesn’t translate to a lower loan balance in the long run, quite the opposite in fact. Since loan terms can span out up to nine years, choosing a long-term loan can put you in danger of paying way more than you should in interest rates. This can have serious financial downsides for you, including the chance of your car going underwater. For this reason, it’s advisable to avoid long loan terms and consider shorter ones. Don’t focus just on how much you’re going to pay monthly, and focus on the totality of the loan instead.

Marketplace Drawbacks 

Although the marketplaces on this list are useful for comparing different quotes quickly, you need to be aware that there are drawbacks to their services. First, the marketplaces we’ve listed are all lead-generating aggregators, meaning that they don’t actually provide you with car loans themselves, but rather share your information with their partners, who in turn provide you with quotes. 

Also, the marketplace’s fine print states that, by requesting a quote, you are agreeing to be contacted by these partners in all manners possible, including calls (automated or by a representative), email and/or texts. Depending on the marketplace, you could be contacted by up to five partners, so bear this in mind before accepting their terms. Not everyone wants to be called directly by a representative, preferring emails or texts, but you’re not given a choice with a marketplace, so use them at your discretion. 

Finally, although most marketplaces on this list do a soft credit pull on your credit to match you with their partners, that doesn’t stop their partners from doing a hard credit pull on your credit. Although credit bureaus set a 14-day grace period to prevent your credit score from dropping, you should be aware that these companies are making hard credit inquiries to provide you with personalized quotes. 

Advance Fee Scams

These types of schemes aren’t exclusive to marketplaces, but they are a dominant threat that users need to be aware of. Advance fee scams prey on unsuspecting users who don’t know that a marketplace won’t charge for their services. After you fill and submit your quote request through a marketplace, you’re supposed to receive offers from certified dealers by email or phone. Scammers take this opportunity and send fake emails with attractive rate offers hoping that you bite. They’ll also tell you that, if you’re interested in their offer, you have to pay an advance fee ranging from $100 to $600 dollars. Once you pay this fee, a scammer will take your money and end all communication. 

To spot these scams, you need to take a few precautionary steps. First, find out if the company that’s extending the offer is an actual partner of the marketplace, which you can do by going to the website’s partner section. Still, some scammers will do their best to pass as one of the marketplace’s lenders, so to spot them you should inspect the emails that you receive. If the email doesn’t have any logos, employee information, or direct links to the company’s website, then you shouldn’t trust it or its content. If the email passes this inspection and looks legitimate, then you need to check if it asks you to pay any fee whatsoever. If it does, then it’s a scam and you shouldn’t reply.

Social Security Number Inquiries

Note that, to give you personalized rates, every auto loan provider, including those on this list, will need personal information, including your full name, physical address, and your social security number. Companies use this number to perform a soft or hard inquiry on your credit, giving them the power to provide you with accurate rates and offers. Some customers might feel discouraged to share their social security number with lenders, especially online, but it’s an important step to provide you with accurate rates. 

Promotional APR Rates

Keep in mind that whenever you see APR rates online before requesting a pre-approval (starting rates, for example), they aren’t meant to represent your actual rates. These rates are meant to represent best-case/worst-case scenarios, and that your actual rates will be different from those being promoted.  

Penalty Fees 

Some auto loan companies charge penalty fees for specific actions, the most common being prepayment, transfer, late payment, and cancellation fees. The auto loan industry is known for its prepayment penalties, which charge you if you pay more than the principal you’re supposed to pay monthly, or if you pay your loan earlier than the term agreed upon. This type of penalty doesn’t make sense from a borrower's standpoint: shouldn’t it be a good thing that you want to pay your car loan early? But in the auto loan business, paying your loan prevents lenders from earning money through interests, so the faster you pay your loan, the less they’ll earn in the long run. 

Other penalties are more basic and aren’t exclusive to the auto loan business. Transfer fees are charged whenever you transfer your auto loan to another person, and late payment fees are charged if you fail to meet the monthly deadline or if you choose the automatic payment option and don’t have the necessary funds. These fees vary from lender to lender and are usually charged after 30 days since the law states that lenders have to wait that long before taking any action. Late payments won’t affect your credit score if you’re able to pay them before 30 days, but if you take more time than that, it can lower your score drastically. For this reason, make sure to pay your loan on time every month.

Predatory Lenders

You need to be careful with who you partner with for your auto loan since there are some lenders that only want to make a profit and don’t have your best interests in mind. These predatory lenders focus their attention on customers with a history of bad credit or with worse-than-average financial stress, but they also take advantage of customers with great credit scores through add-ons and fees. Among the predatory patterns displayed by these lenders are increased purchase rates that benefit dealers, the inflation of overall costs through unnecessary add-ons (GAP insurance, car warranties, and rust proofing, for example) and even “mandatory arbitration” clauses, which can prevent you from suing companies.


FAQs about Auto Refinance


Do you need a down payment for an auto loan?

Nowadays, auto loans don’t require a down payment, although it’s highly advised because it reduces the loan’s overall balance. When you choose the term length of your loan, the lender divides the total cost into equal parts, so if you don’t place a down payment, these monthly installments would take into account the full price of the car. However, if you make a sizable down payment, your loan balance is reduced, leading to lower monthly installments and lower interest rates.

Can I transfer my auto loan to another person?

Depending on the lender, you could be able to transfer your car loan to another person, so you should always ask the lender you’re interested in for this feature. Also, there’s a chance that a lender might charge you transferring and merchant fees, so keep an eye out to avoid any unwanted surprises. To approve the transfer, a lender will always check the transferee’s creditworthiness and income to make sure that the new borrower can pay the loan. If everything checks out, then chances are the transfer will be approved.

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

You take out a car loan to purchase a car in its entirety over a long period of time. In contrast, when you lease, you pay and use a car over a shorter period of time, and by the end of that term, you can either return it and lease another or buy the vehicle outright. The value of an auto loan is determined by the total cost of the vehicle minus the down payment and the value of any car you trade in. Interest charges apply and are determined by the length of the loan term and your creditworthiness. In contrast, monthly payments for leased cars are measured using the predicted depreciation of the vehicle at the end of the lease term, which is usually three years plus fees and interest. This means that 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.

Can you get a car loan with bad credit?

You can get a car loan with bad credit, although it can be harder since lenders measure the risk you pose to them as a borrower by looking at your credit score. To increase your chances, shop around for loans from different financial institutions, especially those that focus on borrowers in your situation. You can also consider taking out a loan with a cosigner that has good credit, as this assures lenders that the loan will be paid.

What is a good interest rate on a car loan?

A good interest rate for a car loan will depend on your particular situation. Interest rates depend on a variety of factors, including your credit score, the type and age of the car you’re buying, the length of the loan’s term, and the market trends in your region. On average, interest rates range between 3% and 10%.

Our Auto Refinance Review Summed Up

Company NameBest
LendingTree Auto RefinanceMarketplace
Capital One Auto RefinanceBank
RefiJet Auto Refinancefor Refinance
Auto Approve Auto RefinancePersonal Service
Caribou Auto RefinanceAggregator
Auto Credit Express Auto Refinancefor Bad Credit
myAutoloan Auto Refinancefor Cursory Information
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