These Are the Five Best Auto Loan Rates You Should Know About

These Are the Five Best Auto Loan Rates You Should Know About

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Buying a car, whether new or used, is a major financial decision. As of September 2021, the average cost of new vehicles was more than $45,000 and $25,000 for used cars.

Whichever route you choose, be it new or used, if you're like most other car buyers, you probably won't be paying in full at the time of purchase. 

Auto loans are an excellent option to help you pay for a vehicle over time, allowing you to enjoy your new purchase on the road immediately while you spread out your financial obligation over the coming years. 

But not all car loans are the same, as different companies offer different terms and conditions, namely interest rates. This plays a significant factor in how much you pay altogether during the loan term. Finding the loan that best suits you is crucial, as it can actually leave you with more money in your bank account month to month.

Let's look at the details of auto loan rates and the five best rates you should know about.

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Auto loans: an overview

With the typical vehicle costing tens of thousands of dollars, financing the expense over an extended period makes sense. Instead of writing a check for a substantial amount of money, you can pay for your vehicle gradually and keep funds in your bank account for other expenses.

Securing a car loan entails applying for the loan, receiving approval, making an optional down payment, and beginning monthly payments. 

One way to quickly get an idea of the loan terms you qualify for is by applying for pre-approval, which usually nets you an offer within minutes. 

Each monthly payment you make goes toward both the principal and interest on your car loan. The principal is the total loan amount you applied for and agreed to pay back. The interest is a percentage of the principal the lender charges you to borrow the money. 

Auto loan terms cover a wide range of term lengths, from the relatively short period of 24 months up to 84 months. While a shorter-term loan's interest costs less, payments are higher. With a longer-term loan, you'll have the benefit of lower monthly payments but pay more in interest over time. A longer-term loan can also help you get behind the wheel of a more expensive car with smaller car payments. 

Though not the only factor to consider when applying for an auto loan, the annual percentage rate, or APR, plays a part in your outright costs over time. 

The APR is a combination of the interest rate and any additional fees and mainly depends on your credit score and credit history. 

Once you've decided to move forward with a car purchase, searching for a good auto loan can be a hassle. When you buy a used car from Shift, they make financing easy. Shift works with a network of trusted lenders who compete for your business, so you get the best deal on financing. And Shift offers best-in-class service contracts at a fair price without sales pressure. You get the great price and value of a used car with the bumper-to-bumper protection of a new car.

Car loan interest rate

Though car loans help you pay over time, they aren't as simple as, let's say, borrowing money from a friend and paying the exact amount back. 

For a lender to make a profit, they have to charge interest and fees during the course of an auto loan. 

Auto loan rates range up to more than 20 percent, depending on a variety of factors. Details like the borrower's credit score, the total amount borrowed, and the loan term length all play a part in determining auto loan rates. 

But while a car loan interest rate plays a part in the total expense of your purchase, it doesn't tell the whole story. The annual percentage rate, or APR, paints a clearer picture of how much you'll owe overall.

The APR considers the car loan interest rate and additional elements like fees and other costs charged by the lender. 

While the car loan interest rate and APR play a part in an auto loan, they aren't the only factors to consider. If the vehicle you want is more expensive than you'd initially planned, a longer-term auto loan helps you afford it by lowering your monthly payments.

The five best auto loan rates you should know about

Several auto loan rates exist that you should know about.

PenFed Credit Union leads the way with a starting APR of .99 percent. Though you need to be a PenFed member to take advantage of these low rates, the application process is uncomplicated. But though the minimum credit score is 620 to secure a loan, you’ll need an excellent score to qualify for their best rates.

Next up is LightStream, with a starting APR of 2.49 percent and the convenience of being an entirely online process. If you sign up for their AutoPay program, you’ll receive an additional rate discount of .5 percent. 

Consumers Credit Union offers rates as low as 2.24 percent to its members. While some credit unions have barriers to membership, Consumers Credit Union has an easy application process. Additional benefits of Consumers Credit Union include their no minimum loan amount and their variable terms.

Specializing in buyers with bad credit, myAutoLoan has rates starting at 2.14 percent. However, one drawback is a higher minimum loan amount. 

If you’re refinancing, AUTOPAY offers rates as low as 1.99 percent, along with a willingness to work with low credit borrowers.

Once you sell your old car and are ready to buy something new, Shift has a wide selection of quality used vehicles on its easy-to-use website, located across the country. And financing with Shift provides a range of benefits when you’re ready to buy your next car. Not only does Shift offer auto loan pre-approval on-site, but they also welcome co-signers if you have a low credit score.

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The five best auto loan rates in summary

An auto loan helps you pay for your car purchase over time, allowing you to hold on to your savings and have extra money around for everyday expenses. 

But not all auto loan rates are alike and vary depending on where you obtain financing. 

A lower car loan interest rate keeps your total cost down throughout a loan, but it’s not the only factor to consider when financing a vehicle. 

The term length of a loan also plays a part in helping you buy the car you want. A car loan term length usually ranges from 24 months to 84 months, with distinct benefits applying no matter which period you choose. 

Remember, longer-term loans help keep your monthly payments lower, so you can get behind the wheel of something you might have thought was too expensive.

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Author
Shift Editorial Team