Best Car Loan Companies
One investment that most people will make at some point in their lives is a car loan for a new vehicle. Whether you are looking for a new or used vehicle, you might need to find the best auto loan for you first. Some people are keen to purchase a brand new vehicle while others are looking for a used one to keep costs down.
No matter what your needs and preferences when it comes to making this type of purchase, one of the things you will need access to is financing. I've found the best auto loan companies.
Best Auto Loan Companies - New and Used Cars
If you need a loan to purchase a vehicle you can either finance directly with the dealer or get a loan from a bank or an online lender. A dealership will make commission on your loan, along with many other ways they get your money, which can make it harder to get a good deal. Plus, when you use an outside lender, you can get your loan before you start shopping for a car. This gives you a budget that is set in stone, which can help you negotiate with a dealer.
This approach makes buying a new or even a used vehicle more accessible and viable, which means that you can get your transportation needs sorted out with greater ease.
While most people are excited about getting a new car, getting the financing sorted can often be the daunting and confusing. In 2014, Americans had $886 billion in unpaid auto loan debt.
However, auto loan companies can provide an invaluable service by helping you are able to get the financing you need to purchase your vehicle. One thing that you will have to do is find the most suitable auto loan service provider to help you find the perfect loan for your vehicle purchase.
Here, I've looked 5 of the top auto loan companies to select from, and by looking at the various key qualities and benefits that these providers offer, you should find it far easier to make an informed decision with regards to which company you should use.
Some auto loan websites actually provide you with a tool allowing you to compare their rates with other lenders. Other great tools available to you are talked about later in this article.
Best Auto Loan Companies: What to Consider
It is important to look at a number of different factors when you are looking for the best place to get a car loan.; this will make it faster and easier to make your decision. Some of the key points that you should look at when you are making your decision include:
- The tools and resources that the company offers, such as guides and loan calculators
- The average approval time for loan applications
- The ease of making an application
- Eligibility requirements for applying for a loan with the company
- How secure the website is due to personal details that you may have to submit
- The variety of loans that the provider is able to offer
- The level of customer support and assistance
- How competitive the typical rates on loans are from the companies
All of these are important factors that you should take into account when you are deciding which auto loan provider you should choose in order to purchase your vehicle. Have a look at the companies that top our list of the best car loans.
The Best Auto Loan Companies
- Competitive APRs
- Streamlined application process
- Live chat available
- Accepting of lower credit scores
- Submit paperwork electronically
- Difficult to know what you're getting in lending network
AUTOPAY is a lending network with the goal of streamlining the lending process in order to connect responsible borrowers fair interest rates. Their intuitive process allows you to buy a car or refinance an existing auto loan by connecting with one of their lending partners. With this method they can also accept lower credit scores and connect them to lenders with which they qualify.
- A good selection of loans to suit different needs and circumstances
- Fast approval on loans
- A range of tools and resources available on the website
- Good levels of customer support offered by the company
- Excellent A+ rating from the BBB
- No trade in calculator facility on the site
- Some restrictions on applications
- No extended validation certificate
MyAutoLoan has extremely fast approval times, very competitive rates and helpful tools. You are able to pay your loan off easily with no penalties and you have the freedom of choosing from many different loan structures. There are certain requirements you and your prospective car need to meet to be able to receive a loan through MyAutoLoan.
- Variety of valuable tools and resources
- Loan options for new and used vehicles
- Excellent vehicle search facility online
- Securely encrypted site for safety
- No application restrictions
- The site does not show an extended validation certificate
CarsDirect has made their way up as one of the top providers of car loans by providing easy (free) applications, fast approval rates, and ultimately great customer service. The CarsDirect website contains a sea of information at your fingertips making it easy to navigate and use great tools to help you find what's best for you.
- Excellent tools and resources
- No application or prepayment fees
- Affordable APR
- Higher rates without auto pay
LightStream have a low minimum loan requirement, easy application process, and quick approval rates.
- Same day approval means you can get your purchase sorted faster
- Fast and simple application process for ease and convenience
- Loans available for those with good or bad credit
- A variety of tools and resources to make the process easier
- Excellent A+ rat
- A number of restrictions are in place when it comes to the application process
Up2Drive gives you same day approval on online applications and works with you if you have bad credit. The Up2Drive website also gives you a variety of tools that allow you to check things like your credit score, trade in's and what your down payment would be.
6 Costly Mistakes to Avoid When Looking for the Best Auto Loans
In my research, I've found that there are a few common mistakes made when you are shopping for the best auto loans for your budget. A car loan is an excellent way for you to adopt sound strategies that can shape the way you approach future financial decisions.
To help you devise a plan before financing a vehicle, it's important to be mindful of common mistakes many of us make that can lead to your loan becoming much more expensive than you intended. Car shopping can be stressful, but if you avoid some of these mistakes, you might be able to get an excellent deal.
1. Only Accounting for the Vehicle's Price
When developing a budget for your next set of wheels, too often we only focus on two factors: the down and monthly payment costs. However, vehicle ownership has many more costs you'll need to consider. For starters, it's a good idea to start with your insurance carrier to ask for a quote on the vehicle you want to buy.
Insurance rates can vary wildly between different car models, therefore, this approach can save you surprises down the road. In addition, you should also factor in costs such as state fees like registration and any services you may have to do. Kelley Blue Book has an excellent tool called the 5-Year Cost to Ownership where you can receive a ballpark amount of how much your vehicle will cost over that time span.
2. Overextending Yourself
While it's tempting to opt for that dynamic sports car it's important you make decisions with your head not with your emotions. With this in mind, take a hard look at your budget and try to find the best car you can within the 20 percent rule.
This idea is that you spend less than 20 percent of your monthly income on your vehicle payment. It's an excellent guideline to follow because it ensures you won't overextend yourself on the loan that way you can make timely payments while saving money.
3. Failing to Shop Around
Car dealerships are convenient in they can be a one-stop resource for when you buy a car, which includes financing, but they may not offer you the best rate.
The key is for you to shop around and a great place to start is with your local bank or credit union particularly if you have accounts with them.
They might be able to offer you a discount or better rates than the network of lenders the dealership uses. You can also apply at the dealership, but it's ideal to have two quotes that way you can find the best price and not overpay. However, the best banks for auto loans may be difficult to qualify for.
4. Trading in Vehicles with Negative Equity
Negative equity means you owe more on the car loan than the fair market value of that vehicle. If you trade that car in, the dealership buys the vehicle for less than the amount of your loan.
Often, this means you'll head into another vehicle loan with negative equity, which can equate to thousands of dollars.
As you take this negative equity into the new loan it will mean from the start your loan is worth more than the car is and you'll likely have a higher monthly payment.
Ideally, if you owe more on your vehicle than it's worth it is best to only trade it in when you can pay the difference in cash. This will help you offset any negative equity moving forward.
5. Focusing on Your Monthly Payment
Having a target monthly payment going into shopping for your car loan is a good way to ensure that you can afford your monthly payment is a smart way to shop.
However, it's important to consider the overall cost as a priority over your monthly payment. Many cars salesmen and auto loan providers will ask you about your target monthly payment and offer you a loan that meets it while inflating the overall cost.
6. Choosing 72 Month Repayment Periods
This goes hand in hand with #5. A salesperson may try to offer you a long repayment period to entice you with a small and affordable monthly payment.
However, a long repayment period, especially 72 months or more, can lead to you owing more than your car is worth. Plus, there are no manufacturer warranties that last that long. So if your car breaks down, you may be paying for a car you can't even drive.
Auto Insurance Amounts Are Inflating
As the price of cars is inflating, according to The Federal Reserve of St. Louis, the average cost of an auto loan is also going up. As you are shopping, and negotiating with salespeople, it's important to look at the average loan amount and the average price of the vehicle you are interested in. Armed with that knowledge, you can go into a purchasing situation knowing industry standards.
The figure below shows the gradual increase in new and used car loan amounts over the past eight years.
Best Auto Car Companies - Useful Tools
Most auto loan providers give you tools on their website allowing you to optimize your time and help you narrow down lenders. Take advantage.
- Interest Rate Estimator: Estimates' the interest you will be paying based off of the loan type, credit type (excellent, good, fair, poor, none), and zip code.
- Loan Amount Calculator: Calculates how much you can borrow with a certain lender based off of your payment amount, loan term, and percentage rate.
- Payment Amount Calculator: Calculates the monthly payment based off of the loan amount and interest rate.
- Free Credit Reports: Takes you to a secure website where you are able to check your credit score at no charge.
- Rate Comparisons: Allows you to view rates from other providers to help you find the lowest rates from a lender you qualify for.
Auto Loan Calculator
Before you start car shopping, it's important to know what your ideal price range is. Use an auto loan calculator to determine how much you can afford to spend on your next car.
For example, if your desired monthly payment is about $400, you have good credit, and you want to pay the loan off in a 48- month span, the Car Loan Calculator shows you should be looking at cars for $20,000 or under.
5 Tips for Finding the Best Auto Loan Companies
Before committing to and auto loan you want to know as much as possible and have some helpful tips to guide you. Take a look at our advice guide section to get better acquainted with the industry.
1. As you approach the commitment of an auto loan, ask yourself, am I able to afford this?
Take a look at your monthly payment rate and make sure you can budget this expense into your current bills without running your bank account dry. Ask yourself if this loan a need or a want. Make sure you are not impulse buying. Remember to look at the requirements (credit, age, income, loan amount minimum, down payment) each lender has to make sure you qualify before applying.
For instance, there may be a 620 credit rating minimum that you overlooked and were denied the loan because of this. Also, every time a third party pulls your credit score your credit score is pulled by a third party, this is called a hard inquiry which affects your score negatively.
2. Auto loans have great features, although they are not aren't the right choice for everyone.
Going a different route and leasing a car may be a better option for your needs. Study the pros and cons of each option and work out what would be best for you. Remember to look at other variables that may change due to buying a new car. You will want to contact your insurance provider to get a quote before you commit to a new vehicle.
3. Avoid Costly Car Buying Mistakes.
Don't commit to the first car you look at. Take the time to test drive and do the necessary research on each car you are interested in. Then you can begin narrowing it down. Use the 20% rule. This is a calculation of the monthly payment and making sure it does not exceed 20% of your monthly income. Help yourself get a low APR (Annual Percentage Rate) by checking your credit history.
4. There are Several Ways to Pay Less for Your Auto Loan
If there is inaccurate information, you want to fix this before you apply for a loan since it will most likely cause you to have a higher interest rate. Search for hidden fees. Many lenders are up front with fees and disclosures, but it doesn't hurt to make sure you know exactly what you are agreeing to. Be able to make a significant down payment.
This helps you pay less on the loan since no percentage of the down payment goes towards owed interest. Consider a co-signer. Even if you do not absolutely need a co-signer, it's great to have one, if possible, to help get you better rates. Remember you are opting into a secure loan. This means your new car is collateral, and if you are unable to make the monthly payments, it will be repossessed.
5. Should You Trade or Sell Your Vehicle?
There are many pros and cons you want to consider when deciding to trade or sell your current car. It is easier to trade, but you may not get the best price. Secured auto loan or unsecured personal loan? Remember there are two options when considering getting a loan, other than leasing.
6. How to Refinance a Car Loan
If you are looking for a way to refinancing car loan rates, there are a few steps you should take first. Whether you have excellent credit or you are trying to refinance a car loan with bad credit, take a look at this guide first.
Best Auto Loan Companies Recap
With the tools, resources, and loan options that are offered by the best auto loan companies, finding, funding, and purchasing the perfect vehicle can become far easier.
These auto loan companies can take a lot of time and hassle out of the whole process, enabling you to enjoy the excitement of buying a new vehicle rather than getting caught up in the more daunting aspects.
If you'd prefer to explore unsecured loan options rather than choosing an auto loan, take a look at our reviews of the best unsecured personal loan providers to get a complete picture of your financing opportunities.
If you are looking to insure your vehicle before you hit the road, explore the best car insurance companies for affordable premiums.
Best Auto Loan Companies FAQs
Should I get an auto loan or a lease?
This is one of the most hotly debated questions in the car buying industry. To buy or not to buy. The idea behind leasing is that you pay to use a car for a certain amount of time (usually two or three years). When the term is finished you return the car. This is appealing because you initially only pay about 20% of the car's value then you make monthly payments with vehicle depreciation taken into consideration. This is great in the short term because you have more of your monthly cash flow available from month to month.
On the other hand, when you buy a car with an auto loan you make monthly payments towards the total cost of the car. Its more each month but you own a car by the end of it. It really depends on your monthly and overall financial needs.
What is an auto loan?
An auto loan is a loan that you get from a bank, a dealership or any number of auto loan companies for the purpose of buying a car. The lender will pay for the initial cost of the car and the buyer pays monthly costs based on the loans principle value (the cost of the car) and the interest that is stipulated by the lender (currently around 3% to 5%). Auto loans are secured credit. This means that the loan is secured against your car and if you can't make payments your care could be repossessed and you cannot settle the debt.
What are the key factors to consider when taking out an auto loan?
Many variables need to be considered when calculating car loans. A few of the most significant include:
- Vehicle's cost
- Rate of interest
- Duration of the car loan
- Credit score
- Down payment
- Used vs. new cars
What am I required to provide in order to get a car loan?
You'll need to provide the standard information you'd submit for any loan plus specifics about your credit score and earnings in relation to the car loan desired.
Where can I get a good rate on my car loan?
The best advice would be to shop around. There are plenty of lenders, including credit unions, banks, auto insurance companies and dealers, all contending for your account.
When and where can I find a good deal on a new auto?
Be on the outlook for dealership advertisements and evaluate the offers. Also, certain times of year are more favorable to find a great deal than others.
What's the best way to pay down the auto loan?
This is a challenge for people who do not maintain a monthly or annual budget of expenditures. The simplest way to determine how much you can manage is to compare it to your current auto payment. By using your existing payments as a foundation, you can better gauge the ability to repay your new car loan.
Should I acquire an auto loan via a bank or a dealer?
There is no definite answer to this question. You should acquire a loan from a reputable lender that offers a payment plan within your budget and comfort level.
Can you get a car loan without good credit?
This may depend on how poor your credit is. Lending institutions often charge higher rates but still offer loans to those with bad credit up to a certain point.
Can excellent credit help me get the best possible pact?
Request quotes from different companies and lenders. These businesses are all vying for your business and may offer you more competitive rates if your credit history is good!
What is an APR?
APR (annual percentage rate) is the yearly rate of interest that you will reimburse on the auto loan. Characteristically, APRs on auto loans are fixed rates, meaning that your APR will remain the same during the lifetime of the auto loan.
What auto loan mistakes should I avoid?
A common blunder with auto loans is to concentrate solely on the monthly rate of the vehicle payment and ignore the overall cost of the auto loan. Be conscious of the total amount including interest as opposed to just the monthly rates.
Where do I get an auto loan?
There are a couple different places to look for an auto loan. The first is with the bank or financial institution where you already do your other banking.
They may offer lower financing since you have an account with them already. You can also check a website like www.bankrate.com to get quotes from financial institutions in your area to find the best interest rate.
Dealerships often offer financing options as well as the automaker themselves. It is worth checking around to finding the best interest rates and terms that will fit your budget.
How do I apply for an auto loan?
If you are applying for a loan through an institution other than the dealership you should apply before you go looking for a car. You will then know you are approved and how much you have to spend. Depending on your bank you may need to get the application at the bank or if you have a bigger bank you may be able to apply online. If you decide to get a loan through the dealership they will help you with the paperwork and let you know whether or not you are approved for a loan.
Why would my application be rejected?
Your ability to be accepted for an auto loan will largely depend on your credit score. If you have bad credit you will have a hard time finding a place that will loan you the money. Even if your credit is pretty good, if any of the following show up on your credit report you may be rejected: open bankruptcy, repossession, foreclosure, or an open lawsuit.
If you are rejected for an auto loan, you will need to find someone to cosign the loan if you don't have the cash to pay for a car or the time to work on fixing your credit.
What vehicles does an auto loan will not cover?
Most financial institutions will not cover commercial vehicles, salvage titles, or conversion vans. They may also not cover used cars that are over a certain mileage so it is important to check their policies so you are aware of what you can not buy.
Is a down payment required with an auto loan?
A down payment requirement will depend on the lender. Some require at least 10-20% down at the time of purchase. This is done for a number of reasons. First, it lowers the risk of the borrower to already have some of the money in their hands. Second, as cars depreciate quickly this will cover the initial depreciation that is likely to take place once the car is driven.
Down payments can also be a good thing for the buyer as it may help you to negotiate a lower interest rate with the lender by paying off a chunk from the start.
Can I pay off my loan early?
Yes, you can pay off your auto loan early. Doing so will save you money in interest. It is important to make sure in the auto loan terms that you can pay it off early without any kind of penalty.
Is my interest rate variable or fixed?
Interest rates can be variable or fixed. With a fixed rate you will have a constant payment for the life of your loan. Banks usually prefer to issue fixed rates.
Variable rates will change according to the bank prime rate. So while it may seem like a good deal, in the beginning, your rate can change quickly month to month. It is especially risky the longer your auto loan term is and can easily leave you "upside down" on your loan.
How much loan am I eligible for?
There are a number of factors that will determine how much of an auto loan you will receive. Factors such as down payment, interest rates, and the term of your loan. It is also important to keep in mind that just because you can afford the monthly payments, you do not necessarily want to spend as much as the bank will give you. Consider how much your monthly payments will affect your budget without causing a strain.