Car Loans

Don’t have the cash to buy a new car outright? No problem. Read on to learn more about auto loans and other financing options.

Frequently Asked Questions
  • What is the difference between a car loan and a personal loan?

    While a personal loan can be used for nearly anything—even purchasing a car—an auto loan can only buy a vehicle. And because auto loans are securitized against the vehicle itself, they often have lower interest rates than personal loans and are more accessible to people with less than stellar credit scores. Since the lender owns the car until a loan recipient makes their final payment, it’s not difficult for lenders to repossess cars.

  • What is the average car loan down payment?

    According to data from car-buying guide Edmunds, the average car loan down payment in 2019 was 11.7%, well below the 20% recommended by credit-reporting agency Experian. A larger down payment usually means better financing terms and lower monthly payments.

  • How much do Americans have in auto loan debt?

    As of the end of Q4 2021, Americans held $1.46 trillion in auto loan debt according to the New York Federal Reserve Bank’s Quarterly Report on Household Debt and Credit. Auto loans were the third-largest kind of debt after mortgages and student loans. And according to credit-reporting agency TransUnion, average auto loan debt per borrower is $21,210 as of Q4 2021.

  • What is a closed-end lease?

    A closed-end lease is a rental agreement in which the lessee (or renter) is under no obligation to purchase the leased asset at the end of the agreement. In closed-end leases, the lessor takes on the risk that the asset will depreciate. That’s good news for the renter, but these leases often come with stricter terms.

Key Terms

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Page Sources
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  1. Experian. "How Much of a Down Payment Should You Make on a Car?"

  2. Edmunds. "How Much Should a Car Down Payment Be?"

  3. Federal Reserve Bank of New York. "Quarterly Report on Household Debt and Credit."

  4. TransUnion. "Recent Vintage Loans Perform Well Even as More Non-Prime Consumers Secured Credit in Second Half of 2021."