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Learn about the auto financing process and how you can secure the best rate on a car loan
Financing a car shouldn’t be an overly complicated process for first-time buyers. The easiest way to learn how to finance a car is by understanding your credit score, by applying for loans from multiple lenders and by getting preapproved before beginning your search.
In this article, we at the Guides Auto Team will help you make sense of the auto financing process before we highlight some providers with the best auto loan rates.
* The calculators used on this website are being provided for educational purposes only. Data will not be collected or stored. The results are estimates based on information you provide and may not reflect actual pricing of your quote.
Learn more about our methodology and editorial guidelines.
| Lending Partner | Loan Terms | Min. APR | Min. Credit Score | See More |
|---|---|---|---|---|
| 48-84 Months | 5.29% | 550 | ||
| 12-84 Months | 5.24% | 620 | ||
| 36-84 Months | 4.99% | 640 | ||
| 12-84 Months | 0% | 300 | ||
| 12-84 Months | 5.49% | 575 |
| Lending Partner | Loan Terms | Min. APR | Min. Credit Score | See More |
|---|---|---|---|---|
| 48-84 Months | 5.29% | 550 | ||
| 12-84 Months | 5.24% | 620 | ||
| 36-84 Months | 4.99% | 640 | ||
| 12-84 Months | 0% | 300 | ||
| 12-84 Months | 5.49% | 575 |
There are a few proven strategies that will help you to secure a car loan with the best possible rate. These steps should begin even before you determine the car that you want to buy. We’d suggest that you approach your car purchase by following the process outlined below.
Your credit score goes a long way toward setting how much you can borrow and at what interest rate. You need to know where your credit report stands before you apply for any car loan. The good news is that you’re entitled to a free copy of your credit report every 12 months from each of the major reporting bureaus. Head to AnnualCreditReport.com to get your free report.
Credit scores typically range from 300 to 850. To get the best annual percentage rate (APR) on your loan, you’ll probably need a credit score of 661 or higher. If you find that your score is 600 or below, you can learn how to improve your credit score before you apply for an auto loan.
If you have poor credit and need a car, you should consider used vehicles that cost less. Watch out for longer loans that come with lower monthly payments, as they could lead to negative equity. Getting a co-signer on your auto loan could also make it easier to get approved for the full purchase price of your potential vehicle.
APRs and interest rates have different meanings. An interest rate is the cost of borrowing money, while the APR gives you a better idea of the total cost of the loan by including fees and discounts.
APRs will be higher than interest rates because they include upfront fees in your overall car payment. Credit cards mention APRs more often than interest rates because it’s a more accurate representation of what you’ll likely end up paying.
Before you finance a car, take the time to explore the factors that could change your credit score. To get insights on the subject, check out the chart below:
Interest rates vary widely depending on the lender and borrower. When you apply for an auto loan, lenders consider the following factors to determine what your APR will be:
To give you an idea of the bigger auto loan picture, here’s a graph with the average car loan interest rates by credit score from Experian. You’ll notice that car buyers with good credit histories get significantly lower interest rates on average.
You can streamline the auto financing process by knowing your credit score, by comparing quotes from various lenders and by getting preapproved for an auto loan. Knowing how to finance a car and understanding how much you can borrow will help you become a stronger negotiator and could move you closer to your dream vehicle.
When you’re ready to compare offers and get a preapproved auto loan, we suggest that you begin with the top-rated lenders outlined below. Drivers are usually satisfied with the rates and service provided by myAutoloan and Consumers Credit Union.
| Lending Partner | Loan Terms | Min. APR | Min. Credit Score | See More |
|---|---|---|---|---|
| 48-84 Months | 5.29% | 550 | ||
| 12-84 Months | 5.24% | 620 | ||
| 36-84 Months | 4.99% | 640 | ||
| 12-84 Months | 0% | 300 | ||
| 12-84 Months | 5.49% | 575 |
| Lending Partner | Loan Terms | Min. APR | Min. Credit Score | See More |
|---|---|---|---|---|
| 48-84 Months | 5.29% | 550 | ||
| 12-84 Months | 5.24% | 620 | ||
| 36-84 Months | 4.99% | 640 | ||
| 12-84 Months | 0% | 300 | ||
| 12-84 Months | 5.49% | 575 |
Loan amounts: $8,000 minimum for purchase loans
Loan terms: 12 to 84 months
Availability: 48 contiguous states
Minimum credit score: 575
We designate myAutoloan as the Best Low-Rate Option because it offers great rates for borrowers with excellent credit and competitive rates for a range of credit scores. The company works with a wide network of lenders, including credit unions, banks and car dealerships. One loan application with myAutoloan will yield four offers that you can compare. The auto finance company has an A+ rating with accreditation from the Better Business Bureau (BBB).
Loan amounts: No minimum or maximum
Loan terms: Up to 84 months
Availability: All 50 states
Minimum credit score: 640
Even if you’ve checked with your local credit union, it’s worth figuring out how to finance a car through Consumers Credit Union. You can join this credit union no matter where you live, and it offers low rates and financing terms of up to 84 months. Consumers Credit Union also features a car-buying service in conjunction with TrueCar, complete with member discounts. The company boasts an A+ rating from the BBB and has been accredited since 2012.
Below you’ll find frequently asked questions about how to finance a car:
The best way to finance a car is to check your credit report, compare quotes from multiple lenders, get preapproved for an auto loan and then negotiate the best price on the vehicle.
Yes, you’ll generally receive lower interest rates when financing cars through a bank or a credit union rather than through a dealer.
It can be easier to get dealership financing than to secure a loan through a bank, particularly if you have bad credit. Dealerships typically have connections with a wide range of lenders and can easily secure financing as a result.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.
Here are the factors our ratings take into account:
*Data accurate at time of publication.
If you have feedback or questions about this article, please email the MarketWatch Guides team at editors@marketwatchguides.
