The 7 Best Auto Loan Rates of 2020

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One big barrier to buying a car is funding the purchase. For many people, paying a lump sum of cash for a new car is simply out of reach. Car loans, however, can help you finance a vehicle over a period of time. These financial tools allow you to break up the cost of a car into affordable monthly payments.

Before you buy a vehicle, it's important to shop for a low-interest rate on your auto loan. This can save you money over the life of the loan and help you negotiate with dealerships. If you currently have a car, refinancing into a lower rate can even decrease your monthly payment.

Below, you'll find seven lenders and companies offering some of the best auto loan rates. In order to come up with this list, we looked at auto loan products from 20 lenders and compared key factors including APRs, minimum loan amounts, repayment terms, credit score requirements, and other benefits.

The 7 Best Auto Loan Rates of 2020

Company Name Best For Min. Credit Score Estimated APR Min. Loan Amount Max Loan Amount Term Length
PenFed Credit Union Overall Not disclosed As low as 1.39% $500 $100,000 36 to 84 months
Bank of America Auto Loans Not disclosed  As low as 2.69% $7,500 ($8,000 for Minn.) Not disclosed 12 to 75 months
Consumers Credit Union Credit Union Not disclosed As low as 2.69% None None 0 to 84 months
MyAutoLoan Bad Credit 575 As low as 3.49% $8,000 ($5,000 for refinance) Not disclosed 24 to 72 months
AutoPay Refinance Not disclosed As low as 1.99% $2,500 Not disclosed 24 to 84 months
Lightstream Online Not disclosed As low as 3.99%  $5,000 Not disclosed 24 to 84 months
Carvana Fair Credit None As low as 3.9% None Not disclosed 12 to 72 months

Best Overall Auto Loan Rates: PenFed Credit Union

PenFed Credit Union

PenFed Credit Union

Pros
  • Offers new, used, and refinance loans

  • Loan amounts from $500 to $100,000

  • Provides rate discounts for using its car buying service

  • Borrow up to 110% of the vehicle's value

Cons
  • High minimum loan amount for longer terms

  • Excellent credit history required for lowest rates

  • Membership in the credit union is required

Key Information

  • APR range: As low as 2.14% APR
  • Minimum loan amount: $500
  • Repayment terms: 36 to 60 months
  • Recommended credit score: Not disclosed
  • Availability: All 50 states

Our top pick for auto loan rates, PenFed Credit Union, offers some of the lowest rates available.

At PenFed, rates for 36-month new and refinance loans start as low as 2.14%, while used auto loan rates start as low as 2.99% for a 36-month term. Deep discounts are available for members who use the credit union's car buying service, with rates starting as low as 1.39% APR for a new car and 2.24% APR for a used vehicle.

You'll have to become a member of the credit union in order to access those rates, but the requirements to join are fairly easy to meet. Membership is open to current and former military members and their families in all 50 states plus Peurto Rico. Those with no military affiliation can join by making a one-time donation to the National Military Family Association or a $15 offering to Voices for America's Troops.

Car loans from PenFed start as low as $500 and move up to $100,000, a wide range that beats out many of the lenders we surveyed.

The downside to PenFed is that the most flexible loan amounts are only offered on the shortest terms. For example, 36-month new car loans from the lender have a $500 minimum loan amount, while 84-month new car loans have a minimum of $25,000. As with most lenders, you'll need excellent credit in order to get the lowest rates.

Why We Chose It: PenFed Credit Union provides some of the best rates available, and members who use its car buying service can get a full percentage point discount on their rate. It also has flexible loan amounts and a number of auto loan options for members. Even though membership is required, which is a disadvantage for some, PenFed makes the requirements to join fairly straightforward.

Best Bank for Auto Loans: Bank of America

Bank of America

Bank of America

Pros
  • Offers new, used, and refinance auto loans

  • Transparent rates and terms online

  • Well-known financial institution

  • Quick financing decision

What We Don't Like
  • Restrictions on which vehicles it will finance

  • High minimum loan amount

Key Information

  • APR range: As low as 2.59% APR
  • Minimum loan amount: $7,500 for purchase ($8,000 in Minnesota)
  • Repayment terms: 12 to 75 months
  • Recommended credit score: Not disclosed
  • Availability: All 50 states

Bank of America (BofA) is a large financial institution offering a number of auto loan options, including new, used, refinance, lease buyout, and private party loans.

For the most creditworthy borrowers, APRs start at 2.59% for new vehicles. Used vehicle loans start at 2.89% APR, while refinances start at 3.49% APR. Customers of the bank who are Preferred Rewards members can get up to a 0.5% discount on their rate.

BofA provides a no-fee online application that it claims can offer a decision within 60 seconds. You can choose 48-, 60-, and 72-month terms, but there are additional options if you apply in a branch or over the phone.

The main disadvantage to getting an auto loan through Bank of America is its restrictions on which vehicles it will finance. It won't provide loans for vehicles older than 10 years old, with 125,000 miles or more, or for vehicles worth less than $6,000. It also won't provide a loan amount of less than $7,500.

Why We Chose It: Bank of America auto loans come with the backing of a major financial institution. Low rates and a big selection of loan options make it a major competitor in the auto loan landscape. It earned slightly above average scores in J.D. Power's 2020 U.S. Consumer Lending Satisfaction Survey. 

Best Credit Union for Auto Loans: Consumers Credit Union

Consumers Credit Union

  Consumers Credit Union

Pros
  • No minimum or maximum loan amount

  • Offers new, used, and refinance loans

  • Offers transparent rates and terms

Cons
  • Lowest rates require excellent credit

  • Membership in credit union is required

Key Information

  • APR range: As low as 2.69%
  • Minimum loan amount: No minimum or maximum
  • Repayment terms: 0 to 84 months
  • Recommended credit score: Not disclosed
  • Availability: All 50 states

Consumers Credit Union (CCU) offers auto loan rates to its members as low as 2.69% for new car loans up to 60 months. Like other credit unions, it requires membership, but it's easy to join. You can become a member by paying a one-time $5 membership fee and keeping at least that much in a savings account. There are no geographic or employer requirements.

CCU doesn't have a minimum or maximum loan amount. Your loan is approved based on your credit score, credit report, and vehicle information. There's also no minimum loan term—you submit a request based on what you need.

Generally, borrowers with excellent credit will qualify for the lowest rates from Consumers Credit Union. But even members who have less than excellent credit have access to discounts. There's a 0.5% discount available for those who autopay from a CCU account. The discount falls to 0.25% for those who make automatic payments from an outside financial institution.

Why We Chose It: Credit unions often provide some of the best rates available, but many restrict their membership. Not only does Consumers Credit Union make it easy to join, but it's relatively inexpensive to do so. It also provides flexible loan amounts and terms to its members.

Best Auto Loan for Bad Credit: MyAutoLoan

MyAutoLoan

MyAutoLoan

Pros
  • Accepts borrowers with poor credit

  • Offers new, used, and refinance loans

  • Sources offers from multiple lenders

Cons
  • Higher minimum loan amount requirements 

  • Not available in Hawaii or Alaska 

Key Information

  • APR range: As low as 3.49%
  • Minimum loan amount: $8,000 for purchase, $5,000 for refinance
  • Repayment terms: 24 to 84 months
  • Recommended credit score: 575
  • Availability: 48 states (not Alaska or Hawaii)

myAutoloan is a marketplace that allows you to compare multiple offers from lenders based on your credit profile. This type of company can help you cast a wide net and get the best offer available. It offers new, used, refinance, private party, and lease buyout loans.

Speed is one of myAutoloan's benefits. Its online form takes just a couple of minutes to fill out, and once you submit your application, it matches you with up to four lender offers. After you choose a lender, you can receive an online certificate or check within 24 hours.

Requirements in myAutoloan's market vary by lender, but borrowers generally can have a credit score as low as 575 and still be eligible for a loan.

Why We Chose It: myAutoloan not only offers reasonable low rates, but it accepts credit scores as low as 575. Its marketplace provides the opportunity for borrowers with poor credit to shop deals from multiple lenders at once.

Best Auto Refinance Company: AutoPay

AutoPay

AutoPay

Pros
  • Offers multiple refinance options

  • Marketplace matches you with best offer

  • Considers all credit profiles

Cons
  • Excellent credit required for the best rates

Key Information

  • APR range: As low as 1.99%
  • Minimum loan amount: $2,500
  • Repayment terms: 24 to 84 months
  • Recommended credit score: Not disclosed
  • Availability: All 50 states

AUTOPAY is a marketplace that makes it easy to shop around for the best deal. It caters to individuals who are rebuilding credit or improving their credit.

AUTOPAY offers more refinance options than many lenders. In addition to traditional auto refinancing, borrowers can choose cash-back refinancing and lease payoff refinancing.

While AUTOPAY's rates start at 1.99%, only those with excellent credit will qualify. According to AUTOPAY, those who have average credit will receive rates as low as 5.49%.

Why We Chose It: AUTOPAY offers several different refinance options, competitive rates, and has flexible credit requirements. Borrowers can easily compare offers from different lenders on AUTOPAY's site and choose the best deal.

Best Online Auto Loan: Lightstream

LightStream

LightStream

Pros
  • Completely online process

  • 0.5% discount with auto pay

  • No restrictions on make, model, or mileage

  • Offers unsecured loans to borrowers with excellent credit

Cons
  • Online application only

  • Prefers borrowers with good credit

Key Information

  • APR range: 3.99%-9.49% (as of 10/16/2020)
  • Minimum loan amount: $5,000
  • Repayment terms: 24 to 84 months
  • Recommended credit score: Not disclosed
  • Availability: All 50 states

Lightstream is the online lending arm of SunTrust Bank. It stands out for its online lending process. Borrowers can apply online, e-sign the loan agreement online, and receive funds via direct deposit as soon as the same day.

Lightstream also offers a remarkably wide range of auto loan options, including new and used dealer purchases, refinancing, lease buyouts, and classic cars. It even offers unsecured loans for those with excellent credit.

Rates from the lender start as low as 3.99%, which includes a 0.5%-point discount for autopay. The maximum APR on an auto loan is 9.49%.

The downside is that the lowest rates from Lightstream are only available to borrowers with excellent credit. That's not unusual, but it means that this isn't the best lender for those with a damaged credit profile. Lightstream doesn't publish its exact credit requirements, but it generally defines excellent credit as having a credit history of five or more years with various account types, an excellent payment history, a proven ability to save, and stable and sufficient income.

Why We Chose It: Lightstream offers a fully online process for its extensive list of vehicle loan options. It's very transparent about its rates and terms, and it has few restrictions on what kind of car it will finance. It's also strong on customer service, receiving a top score in the J.D. Power 2020 Customer Lending Satisfaction Survey. 

Best Auto Loan for Fair Credit: Carvana

Carvana

Carvana

Pros
  • No minimum credit requirement

  • Entirely online dealer and lender

  • No negotiation

Cons
  • Excellent credit borrowers get the lowest rates

  • Income requirement of at least $4,000 annually

  • Only for used vehicles

Key Information

  • APR range: Estimated as low as 3.9%
  • Minimum loan amount: None
  • Repayment terms: 12 to 72 months
  • Recommended credit score: None
  • Availability: 48 states (not Hawaii or Alaska)

Carvana is a completely online used car dealer that also provides direct financing. It makes it possible to secure financing, shop for a vehicle, and get a used vehicle delivered without leaving your house. There is no credit score minimum for its financing program, making this an attractive option for fair credit borrowers. However, you must have an income of at least $4,000 annually and no active bankruptcies.

Like most lenders, borrowers with the best credit get the most competitive rates, starting at 3.9%. You can use Carvana's auto loan calculator to estimate the monthly payment you'll receive based on your loan details and credit score.

Why We Chose It: For fair credit borrowers in the market for a used vehicle, Carvana provides the ability to shop online for financing and a vehicle at the same time. It has no minimum credit score requirement, providing a financing solution for those with damaged credit.

How Do Car Loans Work? 

Car loans are secured loans. The loan is paid off in equal installments over a predetermined period of time. Generally, the vehicle you're purchasing is used as collateral, which means the lender can seize the car if you default on loan repayments.

What Should You Consider When Choosing an Auto Loan?

There's a lot to take into account when choosing an auto loan. Your credit score, for example, has a major impact on the rates you get. The best rates typically go to those with excellent credit.

At the end of June 2020, the average credit score for a new-car loan was 721, and it was 657 for a used car loan, according to a report from Experian. 

Borrowers who received the lowest rates had a score of 781 or higher. Those borrowers, also known as super-prime borrowers, received an average APR of 3.82% for new cars and 4.43% for used cars. Prime borrowers with a credit score between 661 and 780 received an average APR of 4.75% for new loans and 6.15% for used loans, while nonprime borrowers with credit scores between 601 and 660 received an average APR of 7.55% for new car loans and 10.85% for new.

It's also important to consider what term fits your financial situation. Longer terms generally have lower payments but cost more over the life of the loan.

How Do You Get a Car Loan?

Some consumers are able to pay cash for a new vehicle, but most use financing from a bank, credit union, nonbank auto lender, or a dealer. Here are steps you can take in order to get a car loan:

  1. Check your credit report and fix any errors. Your credit score determines what interest rate you'll receive.
  2. Shop around at multiple lenders, including big banks, community banks, credit unions, and online lenders. Compare rates, terms, credit score requirements, and other factors.
  3. Apply and get preapproved for a loan from several lenders to see which offer is the best. Keep in mind that any credit inquires that take place within a 14- to 45-day period only count as a single inquiry on your credit, so it's best to do all of your loan shopping within a short time span.
  4. Find your vehicle and compare the dealer's financing offer to your preapproval offer.
  5. Finalize the offer with your lender, following instructions and filling out paperwork to complete the loan transaction. Ensure that the loan is what you've agreed upon. Check the APR, amount financed, and finance charge before you sign off on the loan.

Should You Get an Auto Loan From a Bank or Dealership?

It's worth shopping at both banks and dealerships for an auto loan. New car dealers and manufacturers, just like banks, can have attractive loan products.

"Depending on the borrower's credit score and market-driven circumstances, the interest rate can be as low as zero percent or under the going rates offered by banks," says Rich Arzaga, certified financial planner and founder of Cornerstone Wealth Management in San Ramon, California.

It's important to keep dealership financing as a possibility, but make sure to look for auto financing before you decide where to buy a car, says Arzaga.

"Know your credit score and search online for bank and other lender rates," says Arzaga. "This should give you a range of what you can expect in the open market, and help you determine if seller financing is a better deal for you," he says. 

How Long Are Car Loans? 

It's common to see 24-, 36-, 48-, 60-, and 72-month car loans. Terms can be as high as 84 months.

The average term for a new car loan in the fourth quarter of 2019 was 69 months, according to Experian's State of the Automotive Finance Market report. For used vehicles, the average term was 65 months. 

Can You Refinance a Car Loan?

Yes, there are many lenders that offer auto loan refinance opportunities, and several promise to make the process quick and easy.

It can pay to refinance your loan in several different circumstances. For example, you might be able to improve your rate and monthly payment, shorten the term of your loan repayment, or extend the term if you're having trouble making payments.

Can You Sell a Car with a Loan?

Selling a vehicle when you still have a loan is possible, but it adds a few extra steps. There are a few different options in this situation.

One option is to pay off the loan in full before attempting to sell the vehicle. That involves contacting your lender to determine your payoff amount. After paying off the loan, your lender will release the lien.

You can sell a vehicle that's financed without paying it off by selling it to a private buyer or trading it in with a dealer.

What Is the Difference Between an Auto loan and a Personal Loan?

It's possible to use a personal loan or an auto loan to finance a vehicle, but the two differ in some important ways:

  • Purpose: Personal loans are unsecured or secured and can be used for many different purposes, including to finance a vehicle, pay for a vacation, or make improvements to a home. Car loans, however, are strictly to finance a vehicle and are secured against the vehicle you purchase. The vehicle serves as collateral.
  • Interest rates: Because auto loans are secured, rates on car loans are generally lower than rates on personal loans.
  • Availability: Auto loans are typically easier to obtain than personal loans, especially for those with a poor credit history.

Bottom Line

Obtaining a low auto loan rate can save you money over the life of your loan. Before you start shopping for a vehicle, get quotes from several different lenders. Consider looking at credit unions, banks, and nonbank lenders for the best rates. 

How We Chose the Best Auto Loan Rates

To select the lenders featured on this list, we evaluated loan offerings from 25 different auto lenders using several criteria. First, we looked at auto loan rates, particularly the APR, and loan options available to borrowers. We also considered loan amount ranges, loan types offered, repayment term options, and credit score requirements. Only companies with a solid reputation were considered. We then reviewed customer service satisfaction and each lender's national reach.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy .
  1. J.D. Power. "J.D. Power's 2020 U.S. Consumer Lending Satisfaction Survey." Accessed May 29, 2020.

  2. Zabritski, Melinda. "Automotive Industry Insights: Finance Market Report Q2 2020." Accessed October 16, 2020.

  3. Cornerstone Wealth Management. "Our Team." Accessed May 29, 2020.