Best Auto Loans for a new car

Auto Loans
Auto Loans for a new car

A car is an expensive purchase, but choosing the right lender can save you thousands of dollars in interest charges and fees. Plus, you want your car shopping experience to be easy and transparent so that you’re confident about the terms you’re getting.

Best Auto Loans for a new car

LightStream provides an attractive option for personal loans, especially if you have a strong credit history. With competitive interest rates and a lack of fees, it's a borrower-friendly choice.

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Pros and cons

Pros

No charges or fees.
Enjoy an interest rate reduction when you sign up for automatic payments.
Home improvement loans offer extended repayment terms.
Benefit from the Rate Beat program and Experience Guarantee.

Cons

The website does not offer a pre-qualification option.
A few years of established credit history are required.
Debt consolidation loans do not facilitate direct payments to creditors.

myAutoloan.com, established in 2003, operates as a direct lending marketplace that serves as an intermediary, gathering loan offers from up to four lenders on behalf of loan applicants.

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Pros and cons

Pros

Pre-qualification Options: Certain lending partners within the network offer pre-qualification using a soft credit check, allowing applicants to gauge their eligibility and potential loan terms without affecting their credit score.
Rate Discounts with Auto Payments: Some network lenders extend rate discounts to borrowers who set up automatic payments, potentially reducing the overall cost of the loan.
No Origination Fees: Applicants benefit from the absence of origination fees, eliminating an additional upfront cost often associated with loans.
Online Application: The platform offers a fully online application process, catering to applicants who prefer the convenience and accessibility of digital submissions.
Co-Borrower or Co-Signer Options: In nearly all cases, myAutoloan.com permits the inclusion of co-borrowers or co-signers, which can enhance eligibility and potentially secure more favorable loan terms.

Cons

Limited Geographic Availability: The service is not available to residents of Hawaii or Alaska, limiting access for individuals residing in these states.
Weekend Customer Service: Customer service is not accessible on weekends, which may inconvenience applicants or borrowers seeking assistance during these days.
Lack of Spanish Website: The platform does not provide a Spanish-language version of its website, potentially excluding Spanish-speaking individuals or those more comfortable navigating in Spanish.

Navy Federal extends another proprietary loan option called Homebuyers Choice, tailored for nonmilitary borrowers who are eligible for credit union membership (including civilian employees of the Department of Defense).

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Pros and cons

Pros

Offers specialized loan options tailored to military borrowers, including the unique Military Choice loan, which serves as an alternative to VA loans.
Provides 24/7 customer service support for borrowers stationed overseas.
Offers home equity loans and lines of credit.

Cons

Borrowers are required to become credit union members before applying for a mortgage.
The lender does not offer renovation or construction loans.
Customer service wait times can occasionally exceed 10 minutes before connecting with a representative who can address inquiries.

PenFed's car buying service enables applicants to find a car online, request member pricing from a dealer, apply for financing online, receive approval, and then visit the dealership.

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Pros and cons

Pros

Multiple Pre-Qualified Offers: PenFed offers up to six pre-qualified loan options, each specifying the interest rate and payment amount for various loan terms. These pre-qualified offers are determined through a soft credit check.
Rate and Offer Consistency: The pre-qualified loan terms provided by PenFed remain consistent throughout the preapproval and approval stages, unless there are changes to the selected vehicle.
Online Car Buying Service: PenFed provides an online car buying service that streamlines the process of finding, financing, and purchasing a vehicle. This service may also offer potential rate reductions or cash bonuses.
Convenient Online Application: Borrowers can complete the entire loan application process online, from submission to document upload.
Seven-Day Customer Service: PenFed offers customer service assistance seven days a week, providing support when needed.

Cons

Credit Union Membership Required: To obtain a PenFed auto loan, individuals must be members of the credit union. Although membership is accessible, it is still a prerequisite.
No Automatic Payment Rate Discounts: PenFed does not offer rate discounts for borrowers who set up automatic payments, which some other lenders provide as an incentive for automatic payment scheduling.
Initial Application Requires Social Security Number: Applicants are required to provide their Social Security number as part of the initial application process, which may be considered sensitive information by some individuals.

Can I negotiate my rate on an auto loan?

You generally can (and should) negotiate interest rates when shopping for a car loan. If you’re applying for a loan through a dealer, they gather your information and send it to several potential auto lenders. The lenders can respond with proposed interest rates. However, the rate the dealership actually gives you can be higher than what the lender proposed. This is because the dealer may choose to charge you more for handling the financing. To add to that, the dealer isn’t legally required to give you the best rate in the first place.

For that reason, it’s always a good idea to try and negotiate the interest rate just like you would the price. Or, if you’re dealing directly with the lender, you can negotiate with them too. Some lenders can try to beat any offer you get from a competitor, so it pays to shop around and gather several financing options.

FAQ

Where Can I Get an Auto Loan?

You can obtain an auto loan through a dealer in a dealer-arranged financing agreement or directly from an online lender, credit union, or traditional bank. Some dealers also offer in-house financing for car buyers with bad credit.

How does a low car loan rate save me money?

When you make an auto loan payment every month, a portion of that money goes to pay for the principal, or the actual balance of the car’s price. Another portion of the payment goes to pay for interest, or the amount of money the bank charges you for the ability to borrow money. The higher the interest rate, the more of your monthly payment that gets shaved off to pay the bank instead of paying for your car.

What is the best place to refinance an auto loan?

The best place to refinance your auto loan is the bank or lending institution that gives you the best rate and most favorable terms. Local banks and credit unions frequently offer promotional rates to attract more loan business, so you may find a great rate in your neighborhood. You can also shop around online to find all of the options available to you.

What credit score is needed to buy a car?

To get the most favorable financing terms when buying a car, you’ll need at least good or excellent credit — a credit score of 670 and greater. That said, it’s not impossible to get approved for a car loan, even if your credit leaves a lot to be desired. Lenders have different credit score requirements, and many work with customers with bad or fair credit. Plus, they consider multiple other factors when reviewing your loan application, such as your income and other debts.

Where can I get an auto loan?

When it comes to seeking vehicle financing, there are three main avenues to explore:

Online Lenders: Online lenders offer a convenient way to compare various financing options. They often provide easy access to rate comparisons, loan terms, and special features. Many online lenders are known for their swift funding processes and user-friendly online applications.
Banks or Credit Unions: If you appreciate the traditional banking experience and prefer in-person interactions, banks and credit unions are excellent choices for securing vehicle financing. These institutions offer the advantage of face-to-face consultations and personalized service.

These options provide a starting point for individuals looking to secure financing for their vehicles. Each option has its own set of advantages, and the choice ultimately depends on the borrower's preferences and needs.

What is gap insurance and do you need it?

Gap insurance, or Guaranteed Asset Protection, serves as a valuable supplement to your standard car insurance. Its primary function is to cover the disparity between the payout from your insurance provider in case of your vehicle being written off or stolen and the initial purchase price of the vehicle. It's crucial to note that gap insurance complements standard car insurance and doesn't replace it.

When is Gap Insurance Essential?

Gap insurance proves beneficial in various scenarios:

Large Loans: If you've taken a substantial loan to finance your car, gap insurance becomes valuable. In the event of theft or write-off, it covers the outstanding finance amount.
Depreciation Concerns: Gap insurance is advantageous when there's concern about your car's depreciation. New cars can lose 15-35% of their value in the first year. Gap insurance ensures a more substantial payout if your depreciated car is written off.

In summary, gap insurance offers financial protection by bridging the gap between your standard insurance payout and the actual cost or outstanding finance of your vehicle, making it a prudent choice for certain car owners.