Best Places to Get an Auto Loan

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Buying a new, used or certified preowned car can be exciting. However, the excitement and fun start only after you’ve secured your financing and gotten the best auto loan rates possible. With 85.4% of new passenger vehicles being financed, auto rates and loan options play a major role in the majority of purchases.

When it comes to paying for your car purchase, you have several options, including dealer financing, bank and credit union financing and online lenders. Choosing the best auto loan option for your transaction is essential to the quality of your experience.

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Compare best places to get an auto loan

Type of Lender Pros Cons Example
  • Streamlined process
  • Potentially better rates
  • May have higher rates than outside companies
  • May be operating as a middleman and increasing the available rate
Financing directly through the dealership when buying a car
  • Preapproval available
  • Competitive lending rates
  • Available to non-bank customers
  • Rates may be higher than credit unions
  • Sometimes limited to certain dealerships
Capital One Auto Loans
Credit unions
  • Better rates than banks based on national averages
  • Preapproval available
  • Only available to credit union customers
Trulliant Federal Credit Union
Online lenders
  • May have the lowest rates available
  • Streamlined application process
  • Customer service can be limited
  • May be one-sized fits all

Dealer financing

Financing a car purchase directly through the dealer might not be what you think. In most situations, the dealer is taking your credit application and forwarding it to several different lenders or the dealer’s lender of choice. While you might think you’re getting the financing directly through the dealership, you’re getting it from a third party. The dealer is operating as a middleman between you and the lenders.

This can help to streamline the purchase process, but it might also get you a higher rate. Some dealerships tack on additional interest to the lender’s rate to keep as additional profit. There are two exceptions to this third-party process — buy here, pay here dealers and captive financing companies.

“Buy here, pay here” dealerships

The first exception to the above form of dealer financing is “buy here, pay here” dealers. These dealers offer in-house financing targeted at people with less-than-great credit. The pros of this option are a streamlined process and financing available to those people who might be rejected by a traditional lender. However, this is an expensive loan and offers a limited selection of cars. Additionally, these lenders/dealers require large down payments as they often expect borrowers to default on the loan.

Captive finance

Many large car dealerships have elected to create their own auto lending companies. These subsidiary companies handle all of the auto loans for that particular car company. For example, Ford Credit offers the dealership financing for Ford dealerships, and American Honda Finance offers auto loans for Honda dealerships.

Sometimes you can get great rates through these companies, and sometimes they charge more than the other options. When purchasing a car, compare the in-house financing options with any other options you have access to. This is how to get the best car loan rates.

Banks and credit unions

You don’t have to get your financing through the dealership just to buy one of their cars. Banks and credit unions offer financing on car purchases through dealerships and personal sales. The main difference between the two options is that rates at credit unions may be lower. In December of 2019, the national average on a 60-month new car loan at a bank was 5.16%. The same loan at a credit union averaged 3.53%.


Bank customers may have an easier time getting approved for an auto loan at their home bank. Because the bank already has access to your finances, they can see more than your credit score when making a loan approval decision. Published rates are typically higher than credit unions, but there may be rate discounts for existing customers.

If you’re looking to see what rates you can get through your bank, you can get preapproval for an auto loan before you start shopping. You’ll know the amount you’re approved for and what your rate will be. This can give you significant bargaining power when dealing with the dealership.

Credit Unions

Members of credit unions may have the ability to get much better auto loan rates on their upcoming car purchase. National averages show that rates are almost 2% better on most loan terms at a credit union than at a bank. Keep in mind this will depend on a lot of different factors like your creditworthiness, loan amount and the specific rules of your credit union.

Credit unions also offer preapproval on auto loans. People interested in making a purchase can utilize this feature to be fully informed before walking into the dealership, a used car lot or scanning the personal car sale ads.

Online lenders

Many online lenders are available with auto loan options to purchase new or used cars from dealers or private sellers. The rates available at online lenders will vary greatly depending on your situation and the company you are dealing with. That being said, you may find some of the lowest APR rates on auto loans at online lenders. Additionally, many of these lenders may be more willing to work with consumers with less-than-great credit scores.

For example, Lightstream auto loans are available starting as low as 3.49% APR, which is better than the December 2019 national average at banks and credit unions. The company also states it can get you same-day funding, loans up to $100,000 and will beat any comparable rate you find elsewhere.

Online auto loans work in two ways. The first option is to get preapproval from the lender. You submit your credit information online and the lender lets you know how much car you can afford. When you find the car you want, you accept the loan and the lender deposits the cash to purchase the car in your account. You take that money and buy the car from the dealer or private seller like a cash buyer. You then make your regular payments to the online lender for the loan.

The second option you have is to find the car you want to buy first. Once you do, you approach the online lender for approval. Once you are approved, the process is the same. The money is deposited into your bank account, and you pay for the car outright. From there, you make your payments to the lender.

Check Your Personal Loan Rates

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

The bottom line

The auto loan process is not a one-size-fits-all process. Thankfully, several flexible options exist for you to choose from. When comparing options, make sure to look at more than just the rate you’ll be charged. Look at things like repayment periods, loan terms, customer service, lender reputation and anything else you deem essential. Ultimately, the ideal lending option and lender for you is out there.

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Jason Lee
Jason Lee
Contributing Writer

Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

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