Best Auto Loans 2020

Buying a new car can be an exciting time, or it could be a necessity where you don’t have much time to lose. Whatever your requirements are, we still want you to find the best auto loans on offer.

We know that we can get caught up in the moment of seeing our dream car whether it is new or used car that we want, and there have been times when we are worried about getting from A to B, so we’ve had to make some quick decisions. This shouldn’t stop anyone from finding the best car loan rates, though.

We found it doesn’t have to take long or slow us down, especially when there is one place that reviews the best car loans available. We know that having everything in one place can help you understand what is required and navigate the different deals available, including finance from car dealers, refinancing, and conversion loans.

Current Best Auto Loan Rates

Car LoansLowest APR Available
New Car - 48 Months4.71%
New Car - 60 Months4.77%
Used Car - 36 Months5.26%

Credit Score Avarage Intrest Rate

Credit ScoreNew Car Avarage APRUsed Car Avarage APR
781-8504.19%4.69%
661-7805.01%6.38%
601-6607.91%10.91%
506-60012.17%16.78%

What Should I Know Before Applying for an Auto Loan?

Loan costs Interest rates Down payment Loan terms and conditions Soft vs. hard credit pull Restrictions Funding

Loan Costs

When it comes to the loan, make sure you know if there are origination fees for drawing up the paperwork, and if there are penalties for early repayment.

Interest Rates

Finding the right interest rate is critical. Rushing the decision can mean paying more than you need to. We found that comparing interest rates from different loan and finance providers meant we had a good picture of what was on offer, and what was a reasonable rate for us.

If you find a good rate, we found it is still best to know the overall cost. A lower rate could be over a longer period, which may or may not suit you. Look at the APR rather than just the interest rate to get the full picture.

Down Payment

If you can, aim to make a down payment on your car. This means paying a certain amount upfront. We found that paying a 20% down payment had lots of advantages.

We had a lower total balance to pay, which meant less interest. It also gave the lender confidence in our ability to pay, so we got a better rate. Sometimes an alternative to making a downpayment is to trade in your existing car, which is also a good option.

Loan Terms and Conditions

There is so much more to compare than interest rates. The terms of the loan are important too. If you have an understanding of the APR, which factors in fees, as well as the interest rates, then you should also look at the length of the loan. This helps you to establish how much you will pay in total.

Some loans come with balloon payments, that means coming to a time when you have to pay the remainder of the loan at the end of its term. If you can’t pay the balloon payment, you may need to refinance your loan. If you can afford the higher monthly payments, you might choose to avoid this scenario.

Make sure you are clear on who will be the owner of the car. Some loans are more like a lease agreement that gives you the opportunity to convert and become the car owner.

Soft vs Hard Credit Pull

It often makes sense to be pre-approved for loans, so that you can negotiate with the car dealer. When it comes to applying and being approved for a loan, your credit score will need to be checked.

This is done in a soft version, which provides basic information and does not affect your credit score. Further down the line, you will most likely need to approve a hard credit check. This doesn’t stay on record, and several credit checks over a short period of time can impact your score.

Restrictions

The terms of the loan may set out some restrictions. We think it will save time to be sure what the restrictions are and that you can meet the requirements for the loan you choose. There are some lenders won’t finance for specific reasons, including the vehicle type, how the vehicle will be used, the make of the vehicle, or, for used cars, the mileage.

Funding

You can apply for car loans to fund the full amount of the purchase, or varying percentages if you can make a downpayment. As mentioned above, this can be extended to include the fees associated with the purchase.

It is essential only to accept loans where you can afford to make the monthly payments.

Auto Loan Process Explained

Once you have the above information, you are ready to start the loan process. By knowing what you want and can afford, you can look at your preferred lenders and learn more about the loan process.

Where to Start?

Having the cost of the vehicle, an idea of the amount you can make as a downpayment, your ideal loan length, and monthly payment amount will help you as you go along and give you things to negotiate over. Make sure you have as much paperwork to hand as possible.

How to Apply

Narrow down your list of lenders and choose whether to complete online application forms, contact them about the application, fill in a paper form, or visit their offices.

Your application will require your personal details, including information about your existing debts, your salary, and your Social Security number.

Avoid Common Auto Loan Mistakes

Don’t apply for your loan, accept it and buy your car on the same day if you can help it. Finding a loan you want to apply for doesn’t mean you will accept that one. Just as the first offer you find on the car you like isn’t necessarily the one you will take. Give yourself time to compare and negotiate.

Make sure you meet the requirements and do everything in the right order. Getting pre-approved instead of just pre-qualified means you know you can get a loan you can afford before you buy the car. Usually, you’ll have 30 days to accept an offer, so make sure everything lines up.

Set a Budget

Once you have your pre-approval offer, you can set a budget. Remember to take into consideration the fees, taxes, and insurance. There are auto loan calculators that can help you to calculate everything, taking into account your down payment amount and lending terms.

Know Your Financial Limits

Your credit score might help you get a loan with a particular APR, but that doesn’t mean it is right for you. When using the auto loan calculator, think about how much you can spare each month, including insurance and gas. Sometimes accepting a more extended loan period will increase the overall amount but will help your financial stability.

Save for a Down Payment

We recommend putting together a down payment for your car. If time is on your side, it is worth putting away a little money each month to build a down payment that is at least 20% of the car’s values.

Check Your Credit Score

You can get a free copy of your credit score report once every 12 months. Request it from a reporting company like Experian, or see if your bank or credit card issuer will provide one for free.

Having your report in advance means you can clear up any errors or fraud issues. If your credit score is bad and you can wait, it will also give you time to improve your credit by paying off your credit card or settling other overdue payments.

Cosigner

If the rates for getting a loan on your own don’t work, or you aren’t eligible for a loan, consider getting a cosigner who will share the responsibility with you.

Shop Around

When comparing rates, make sure you choose several different institutions, such as online lenders, large banks, credit unions, and then include dealerships.

Get Pre-Approved

Once you have shopped around for rates and other factors, it is a good idea to apply for pre-approval. If you are applying to more than one lender to keep your options open, do so within 14 days to reduce the impact that this has on your credit score.

Pre-approval differs from pre-qualification; you should only take this step if you are moving forward as it does include a hard credit pull, but it will strengthen your negotiating stance.

Local Credit Unions

A credit union is a not-for-profit organization that provides financial services, including offering loans. They are usually cooperatives or member-owned and can be a good option for lower rates. They can also help you improve your credit score.

Take Extra Fees Into Consideration

When setting your budget and considering your financial limitations, don’t stretch yourself so thin that you can’t afford the added extras. Make sure you can afford any fees from the car dealer and the loan provider.

Check Your Paperwork

Once you have your offers from a dealership and your pre-approved loan, check all of the paperwork so you can decide how to proceed. Once you have made the decision, recheck the paperwork to make sure your figures add up and that you know what you agree to before signing.

Bottom Line

Comparing rates and terms can help you get the best car loan for you. It needn’t take a long time, but just some breathing space for research, preparation, and consideration can save you thousands in the long run.