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Hear from our editors: The best auto loan rates of 2021

Updated December 1, 2020

This date indicates our editors’ last comprehensive review and may not reflect recent changes in individual terms.
Editorial Note: Credit Vana receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted.
Written by: Ben Luthi
If you’re hoping to qualify for the best auto loan rates, having excellent credit is a good start.
But even if your credit isn’t perfect, some lenders offer interest rate discounts and other features that may make them a good fit for you. We’ve rounded up banks, credit unions and online lending platforms offering some of the best starting loan rates (as of December 1, 2020) and other potential benefits for different auto loan types.

Best auto loan rates

*May offer different terms on Credit Vana.

Best rates for new-car loans: Bank of America and PenFed Credit Union

Loans for new cars typically have lower interest rates than used-car loans, so you may already be on track to score a better auto loan rate. Among all of the lenders we reviewed, Bank of America and PenFed Credit Union are our top choices.

Bank of America

Why Bank of America stands out: If you’re a Preferred Rewards customer with the bank, you can qualify for an interest rate that’s up to 0.5% lower than the already low annual percentage rate, or APR, that the bank offers.
But to qualify for the Preferred Rewards rate discount of 0.5%, you must have three-month average combined balances of at least $100,000 in qualifying accounts with Bank of America and Merrill. And to be eligible for the lowest rate discount of 0.25%, you’ll still have to have three-month average combined balances of $20,000.
Here’s some more info about Bank of America auto loans.
  • If you choose to purchase from a dealership, you’ll be limited to franchise dealerships and a few independent dealers, including CarMax, Carvana and Enterprise Car Sales.
  • Repayment terms range from 12 months to 75 months. Keep in mind that the lender may offer different terms on Credit Vana.
  • If your application is approved, your rate is locked in for 30 days, which gives you time to shop around.

PenFed Credit Union

Why PenFed Credit Union stands out: PenFed offers auto loan rates as low as 1.39% if you purchase a new vehicle through its car-buying service — 2.14% if you get a new-car loan but don’t use the car-buying service. It also allows you to finance up to 110% of the purchase price of the vehicle. That feature can come in handy if you’re low on cash and want to buy some add-ons like a maintenance contract or GAP insurance.
Here are some things to know before you apply for a PenFed Credit Union auto loan.
  • You must become a member to get a car loan with PenFed Credit Union. Qualifying groups include members of the military, eligible veterans and retirees and their families. You may also be eligible for membership if you’re a member of certain organizations.
  • Loan terms range from 36 months to 84 months. Remember that while choosing a longer term could reduce your monthly payment, you could end up paying more in interest over the life of the loan.
  • If you’ve been a member of the credit union for at least 90 days, you can apply for preapproval (a conditional loan approval that includes an estimated loan rate and terms). Preapproval can tell you how much you may be approved to borrow and can help you focus on finding a car that fits your budget instead of worrying about what financing the dealer may offer you. Just keep in mind that preapproval isn’t a guarantee of approval, and your loan terms may change after you submit a formal application.

Best rates for used-car loans: Chase and U.S. Bank

If you’re buying used, you may not get an auto loan rate that’s as low as if you were buying new. But considering that, according to Carfax, new cars can lose more than 10% of their value within a month of your purchase, a used vehicle may still make better sense financially.
For used-car loans, we like Chase and U.S. Bank. Here’s why.

Chase

Why Chase stands out: While the bank doesn’t list its auto loan rates, you can use its online auto loan calculator to see estimated rates. We were able to see an estimated APR as low as 2.99%.
Here are some more details about Chase.
  • You can get an interest rate discount if you’re a Chase Private Client, though this requires an average daily balance of at least $250,000 in qualifying deposit and investment accounts.
  • Chase doesn’t require a down payment on auto loans. But if you’re able to, it may be a good idea to make one. It could help improve your chances of approval, lower your interest rate and reduce your risk of becoming upside down on your auto loan.
  • You must finance a car from a dealer in Chase’s network.
For more details, read our review of Chase auto loans.

U.S. Bank

Why U.S. Bank stands out: The bank offers interest rates as low as 2.59% for those who meet a specific set of criteria. The requirements include having excellent credit, buying a car that’s less than a year old and setting up automatic payments from a U.S. Bank account. You also must have a loan amount of at least $30,000, a loan term of 36 months or less, and a loan-to-value ratio of 80% or less. But even if you don’t meet those conditions, you may still qualify for the same rates as a new-car loan if the car you’re buying is no more than 6 years old.
Here’s more on U.S. Bank.
  • You need to live in one of the 26 states where U.S. Bank has a branch.
  • Loan terms range from 12 months to 72 months.
  • The bank charges a prepayment penalty if you pay off your loan within the first year.

Best rates for private-party loans: LightStream and PNC

Buying a car from an individual instead of a car dealership has both benefits and drawbacks. It can be cheaper, but not all lenders offer financing for private-party sales.
LightStream and PNC are two banks that offer private-party loans with low starting rates.

LightStream

Why LightStream stands out: LightStream offers rates as low as 3.49% APR on private-party loans if you opt into automatic payments. The bank offers both secured and unsecured loans loans for a car purchase.
With an unsecured loan, you don’t have to worry about having your car repossessed if you can’t make your payments — though your credit would probably take a big hit. And if another lender approves you for an unsecured loan at a lower rate, LightStream will offer a rate that’s 0.1 percentage point lower through its Rate Beat program (this program isn’t available for secured auto loans).
Here’s more on LightStream.
  • LightStream doesn’t offer the opportunity to apply for preapproval.
  • Repayment terms range from 24 months to 84 months.
  • LightStream has no restrictions on the model year, make or mileage of vehicles it will finance. This can be helpful if you plan to buy an older vehicle.
Read our review of LightStream auto loans for more information.

PNC

Why PNC stands out: Interest rates go as low as 3.24% if you opt into automatic payments from a PNC checking account. This rate is pretty close — or in some cases, lower than — the starting new-car loan rates some other lenders offer.
Here’s some more info on PNC.
  • PNC doesn’t appear to finance car models older than 2012.
  • You need to live in a state where PNC does business to apply (enter your ZIP code on the online appointment request form to find out if you’re eligible). PNC branches are located in the Mid-Atlantic, Southeast and Midwest regions of the U.S.
  • PNC offers private-party loan terms of 12 months to 72 months.
Learn more in our PNC auto loans review.

Best rates through lending platforms: AutoPay and MyAutoLoan

AutoPay and MyAutoLoan aren’t direct lenders — they partner with financial institutions across the U.S. to offer auto loans online. Working with a variety of partners helps both companies find loans for people across the credit spectrum, as well as offer competitive starting APRs to those who qualify.

AutoPay

Why AutoPay stands out: AutoPay offers rates as low as 1.99% APR for those who qualify.
Here’s more information about AutoPay.
  • AutoPay lenders offer a range of auto loans, including loans for new and used cars purchased from a dealership, private-party loans, and refinancing options such as traditional, cash back and lease buyout loans.
  • AutoPay offers the ability to apply for prequalification. If you prequalify, you can check your estimated rates and loan terms without affecting your credit scores. Just be aware that prequalification isn’t a guarantee of loan approval. And if you’re approved after you submit a formal application, your loan terms may change.
  • The company has a high approval rate — it claims on its website that on average, 94% of marketplace customers who apply for a loan through AutoPay are approved.
Read our review of AutoPay auto loans for more details.

MyAutoLoan

Why MyAutoLoan stands out: Similar to AutoPay, some lenders in the MyAutoLoan network offer rates as low as 1.99% if you qualify. MyAutoLoan makes shopping around for a car loan easy — after submitting the prequalification application, you could receive up to four loan offers.
Here are some more details about MyAutoLoan.
  • Lenders in the MyAutoLoan network offer new- and used-car loans, private-party loans, lease buyout loans and refinance loans.
  • MyAutoLoan considers people who have less-than-perfect credit. Lender requirements vary, but in general, you must be at least 18 years old, have a FICO® score of at least 575, and have a minimum income of $21,000 to qualify ($18,000 for refinance). Lenders in the MyAutoLoan network may also consider people who have filed for bankruptcy, but the bankruptcy must be discharged or dismissed.
  • MyAutoLoan doesn’t offer loans in Alaska or Hawaii.
To learn more, check out our full review of MyAutoLoan.

How we picked these lenders

In choosing lenders for this roundup, we looked primarily at their starting loan rates. But we also considered other factors that can be beneficial, such as a range of loan terms, interest rate discounts, the ability to apply for prequalification or preapproval, and geographic availability.
While some of these lenders don’t offer auto loans in all 50 states, we still felt they could offer enough value to include them on the list.

What to consider with starting auto loan rates

The most important thing to keep in mind as you’re searching for the best auto loan rates is that they’re typically reserved for people with excellent credit. Depending on the credit-scoring model the lender uses, that could mean having a score in the high 700s or even 800s.
Beyond your credit scores, factors including the kind of loan you want, the amount and the repayment term could affect whether you qualify for a lender’s lowest interest rates.
Note that as you’re shopping around, you can apply for multiple auto loans in a short period — typically 14 days, though it can vary by credit scoring model — during which the associated hard credit inquiries might only count as a single hit.
As you compare loan offers, consider any fees, the loan amount, loan term and estimated monthly payment in addition to the APR. Weighing all loan factors can help you identify the best loan for your needs.

What is a good interest rate on an auto loan?

These were the average car loan interest rates as of Sept. 25, 2020, according to the National Credit Union Administration.

But remember that a range of factors, including the type of lender, can affect the rate you’re offered. Credit unions tend to offer lower rates than banks. And if you qualify, you may be able to get the lowest possible rate — 0% APR — when you get a new-car loan through an automaker’s finance company.

FAQ: Editors’ answers

Editorial Note: Credit Vana receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted.
What kind of credit scores do you need to buy a car?
There’s no universal minimum credit score required to get a car loan — score requirements vary from lender to lender. Some lenders specialize in lending to people with excellent or good credit, while others focus on lending to those with less-than-perfect credit scores.
In general, lower credit scores could result in fewer offers from lenders. In those cases, you may be required to make a down payment or apply with a co-signer who has good credit.
Lower credit scores can also drive up the interest rate offered to you, which means you could end up paying more to finance your car than someone with good credit. Shopping around to see what rates and terms you might qualify for with different lenders can help you find a loan that fits your budget.
What credit score do you need to get 0% APR on a car loan?
To qualify for a 0% APR auto loan, you typically must have excellent credit scores. This could mean a score in the upper 700s or even in the 800s, depending on the credit-scoring model the lender uses.
Plus, you’ll usually need to get your auto loan through the automaker’s financing company, and you’ll be limited to the makes and models included in the 0% APR promotion. This APR is typically only available on new cars, as well.
Is it better to get a car loan from a bank or dealership?
You may be offered a similar interest rate, terms and fees whether you apply for a loan from a bank or through a dealership, but you won’t know for sure unless you shop around and compare offers.
In some cases, though, a car loan from a bank may be a better option. Although it’s not guaranteed, a bank may offer you a lower rate because dealers sometimes add a markup to your loan’s interest rate in exchange for arranging your financing. Another benefit: It can also prevent a situation where you fall in love with a car and accept the financing the dealer offers you before comparing other loan options.
Last, some banks offer the ability to apply for preapproval. If you’re preapproved, you’ll get an estimate for a loan rate and terms you’re conditionally approved for. Preapproval isn’t a guarantee of loan approval, but it provides helpful information. For example, knowing the maximum amount you can finance can help you stay on budget and avoid tempting upsells as you shop for a car.
Is a 72-month car loan a bad idea?
Whether a 72-month car loan is good or bad depends on your unique financial situation. It’s right in some cases, and wrong in others.
While a longer loan term can reduce your monthly payment, you may end up paying more in total interest over the length of the loan. You could also end up owing more on your car than it’s worth, which can make selling or trading in your car complicated and expensive down the road. And if your loan term is longer than your car warranty period, you could find yourself shelling out a hefty amount for car repairs while still making loan payments.
Still, a 72-month auto loan may be ideal if the lower monthly payments free up some cash to pay down higher-interest debt elsewhere more quickly.
Before getting a 72-month car loan, consider whether buying a less expensive vehicle or delaying your purchase until you can save for a larger down payment might be better options to make your loan more affordable.