7 Best Car Loan Rates of 2023

Getty Images
Getty Images
  1. Best for New Cars

    LightStream

    Our Partner

    • Term:

      24-84 months

    • Minimum Loan Amount:

      $5,000

    • Available Loans:

      New Cars

    See Rates

  2. Best for Private Parties

    Bank of America

    Our Partner

    • Term:

      48 - 72 months

    • Minimum Loan Amount:

      $7,500

    • Available Loans:

      Private Purchase

    See Rates

  3. Best for Personalization

    Capital One

    Our Partner

    • Term:

      36 - 72 months

    • Minimum Loan Amount:

      $4,000

    • Available Loans:

      New & Used Cars

    See Rates

  4. Best for Easy Online Quotes

    CarsDirect

    Our Partner

    • Term:

      Varies by lender

    • Minimum Loan Amount:

      Varies by lender

    • Available Loans:

      Used Cars

    See Rates

  5. Best Overall

    PenFed

    Our Partner

    • Term:

      36 - 82 months

    • Minimum Loan Amount:

      $500

    • Available Loans:

      New & Used Cars

    See Rates

  6. Best for Used Cars

    Consumers Credit Union

    Our Partner

    • Term:

      36 - 84 months

    • Minimum Loan Amount:

      $7,500

    • Available Loans:

      Used Cars

    See Rates

No one wants to pay more for their new car than necessary. Identifying the best car loan rates for your budget will keep your monthly payments affordable and may even allow you to purchase that dream car you once thought was too expensive.

We’ve exhaustively researched the topic to identify the best auto loan rates for 2023. Keep reading to see our selection of who has the best auto loan interest rates on the market and the advantages and disadvantages of working with each company.

Our Top Picks for Best Car Loan Rates

  • PenFed Credit Union — Best for Flexible Options

  • Consumers Credit Union — Best for Used Cars

  • Lightstream — Best for New Cars

  • Autopay — Best for Refinancing Options

  • Capital One — Best for Personalization

  • CarsDirect — Best for Easy Online Quotes

  • Bank of America — Best for Private Parties

  • Carvana — Best for Bad Credit

Best Car Loan Rates Reviews

Pros

  • Loan amounts between $500 and $150,000

  • Financing terms range from 36 to 84 months

  • Borrowers can finance up to 125% of the needed amount

  • Easy to apply online

Cons

  • PenFed membership required to borrow

  • Higher interest rates when buying used cars rather than new cars

  • The minimum credit score needed to borrow is not disclosed

Why we chose it: PenFed Credit Union offers flexible financing options tailored to meet any budget.

PenFed Credit Union is our choice for anyone who wants partial or complete financing and a comfortable repayment plan. With loans between $500 and $150,000, PenFed allows the option to borrow a smaller amount for those who don’t need to finance their car purchase entirely.

Terms vary from 36 to 84 months on new car loans and 36 to 72 months on used car loans.

Members who purchase a new car through the PenFed Car Buying Service can receive the credit union’s best new auto loan rates and discounts on vehicle pricing. PenFed members can also earn bonus cash when purchasing certain brands using the program.

Repayment plans vary depending on the amount borrowed. For example, the minimum loan amount you can borrow for a 36-month term is $500, while an 84-month term requires a loan of at least $20,000. PenFed allows you to borrow up to 125% of the car’s total value, which can help you pay incidental costs without going out-of-pocket.

The entire application process occurs online, and anyone is eligible to apply. However, you need to become a PenFed member before receiving loan approval.

PenFed doesn’t disclose the minimum credit score needed for auto loan best interest rates. Individuals with no credit or bad credit may be unable to secure financing.

Pros

  • Competitive rates on used car purchases

  • Same-day financing available

  • Lower available interest rates for autopay enrollment

  • No maximum loan amount

Cons

  • Membership required for loan approval

  • Limited repayment plan options

Why we chose it: Consumers Credit Union offers lower interest rates on auto loans for used cars compared to many other auto lenders.

Consumers Credit Union doesn’t limit how much you can borrow on your auto loan purchase. Available financing depends on your credit score and how much you qualify to borrow, but you can only finance up to 100% of the car’s value.

Same-day financing enables you to secure a loan quickly, and the application process, including signing documents, happens online. Members who authorize Consumers Credit Union to make automatic payments will receive a discount of 0.25% on their loan’s interest rate. Funds must be deducted from your Consumers Credit Union account. While anyone can apply, a Consumers Credit Union membership is required for loan approval.

Pros

  • No down payment required

  • Same-day financing available

  • No transaction fees or prepayment penalties

  • Autopay discount

Cons

  • Good to excellent credit is required to qualify for the lowest rates

  • No pre-approval process is available

  • $5,000 minimum loan amount

Why we chose it: Lightstream requires no down payment and offers loan amounts that range from $5,000 to $100,000.

Lightstream may not offer the best auto loan rates for new cars, but the company makes it possible to borrow a large amount with nothing down. This makes Lightstream an ideal option for buying a new vehicle when short on available cash.

You can quickly apply for a loan online and get the money deposited directly into your bank account if approved. Unsecured loans require a higher credit score for approval and will have higher monthly payment amounts.

Interest rates vary depending on the loan term and the borrower’s credit score. Loan terms range between 24 to 84 months, and financing is available for purchasing new, used and classic cars.

Loan rate discounts up to 0.50% are available for customers who enroll in the Lightstream AutoPay program. You must enroll in AutoPay before loan funding for the discount to apply. Lightstream has no pre-approval process, so you must complete the loan application to determine if you qualify.

Pros

  • Multiple auto loan refinancing options

  • Helps lower monthly payments

  • Customer can qualify for refinancing with an average credit score

  • Easy application process

Cons

  • Longer refinancing approval times

  • Can take up to two weeks to receive loan funding

  • Lower credit scores mean higher interest rates

Why we chose it: Autopay’s three types of auto loan refinancing let you find the right plan to meet your financial goals.

Autopay works with a network of online lenders so you can find the best auto loan refinance rates to meet your budget. It only takes a few minutes to fill out the online application, or you can call to complete the process with a representative over the phone. Lenders will review your application and compete to earn your business by offering loans with some of the lowest rates available.

Autopay offers three types of refinancing options:

  1. Traditional refinancing. Allows you to lower your monthly car payments, decrease the length of your loan or remove co-signers from a loan.

  2. Cash-back refinancing. Refinancing options enable you to receive up to $12,000 cash back from your loan amount. These funds can help to consolidate debt or pay off high-interest loans.

  3. Lease buyout refinancing. These plans make it possible to purchase a vehicle before the end of your lease. An early buyout prevents you from paying any mileage or usage obligations a dealer may charge at the end of a lease.

A credit report check is all you need for pre-approval. On average, Autopay helps users save $105 a month by linking them to lenders with loan rates up to 50% less than what they’re currently paying.

Pros

  • Get pre-qualified without impacting your credit score

  • No application fees

  • Flexible terms and interest rates

  • Review the inventory of thousands of dealers from home

Cons

  • Loans only available for purchases from dealership partners

  • No pre-approval process

  • $4,000 minimum loan

Why we chose it: With Capital One’s Auto Navigator program, you can find the right new or used car for your budget.

Capital One makes it easy to shop and buy a car online from the comfort of your home. You don’t need to search for the “best auto loan rates near me” because Capital One has partnered with nearly 12,000 dealerships nationwide. Using Capital One’s Auto Navigator, you can search for the exact make, model and color to find the perfect car.

The pre-qualification process doesn’t affect your credit score, allowing you to determine how much you can borrow before getting ready to buy. Once you’ve found the right vehicle, you can adjust factors like down payment and term length until you find the right deal.

Adjustable loan terms range between 36 and 72 months. Pre-qualification depends on your income, credit score and the vehicle you want to purchase. The minimum loan amount is $4,000, and you can borrow 100% of the vehicle’s value plus any optional dealer products, such as an extended warranty.

Loans are only available when purchasing a car from participating dealers. Capital One doesn’t offer financing on purchases from unaffiliated dealerships or private sellers.

Pros

  • Helps borrowers with bad credit or no credit find financing options

  • Can start the application process in just 60 seconds

  • Receive loan offers within 24 hours

  • Can still receive approval with bankruptcies on your record

Cons

  • Not a direct lender

  • Purchasing options are limited to vehicles available through the loan provider

Why we chose it: CarsDirect easily enables buyers with poor or no credit to find willing lenders online.

CarsDirect believes everyone should have the option to buy the car they desire, regardless of their credit history. Their easy-to-use online system lets users quickly input their information and receive a loan offer within 24 hours.

Borrowers who have had their private-party loan applications denied due to low credit scores or a history of bankruptcies can find specialized programs to provide financing and the chance to rehabilitate their credit rating.

CarsDirect also helps those with no credit history find customized car loans through their national network of dealers so they can start building the foundation of a strong credit report.

CarsDirect is not a direct lender, which means they only act as an intermediary that matches borrowers with willing lenders. They have no impact on the approval process or the loan term and APR offered by the lender.

Depending on the terms of the offer, you may be limited to only purchasing a vehicle available through the lender. Most lenders offer new and used vehicles, but you may not find the exact car you want.

Pros

  • Receiving financing to buy from a private party

  • Private-party auto loans often carry lower interest rates than personal loans

Cons

  • No pre-approval process

  • The size of the loan may be limited by the age and condition of the vehicle

  • Higher interest rate than buying through a dealership

Why we chose it: Bank of America makes buying a vehicle from a private seller as easy as buying one from a dealership.

Bank of America understands that you may not find the right car at a dealership. Unlike many lenders, they offer private-party auto loans, so you don’t have to pay cash for your desired car.

While private-party auto loans often carry lower interest rates than unsecured personal loans, they have higher rates than when buying from a dealership. Loan terms of 48, 60 and 72 months are available.

Credit history, loan term, age, mileage and condition of the car will all determine the interest rate on the auto loan.

Pros

  • Guaranteed financing for borrowers, no matter their credit history

  • Pre-qualify without impacting your credit rating

  • Easy-to-use online application process

  • Minimum loan of $1,000

Cons

  • Higher interest rates than many competitors

  • Financing only for vehicles purchased through Carvana

  • Late payment fees

Why we chose it: Carvana guarantees borrowers will qualify for a loan in minutes, regardless of their credit history.

Carvana may not offer the best auto loan rates, but they’re willing to provide financing to individuals with bad credit and no active bankruptcies.

After completing the pre-qualifying process online, you’ll have the option to see the available financing options and which cars you can afford. Interest rates vary depending on your credit score with loan terms from 12 to 72 months. You must have an annual income of at least $4,000 to qualify.

Carvana’s 7-Day Money-Back Guarantee gives you the freedom to change your mind after driving the car for a few days, and a 100-day limited warranty provides some protection on your purchase.

Carvana only offers to finance vehicles purchased through Carvana.

Other car loans we considered

The best of the rest that didn’t make our list:

Caribou

Pros

  • Check your refinancing options without impacting your credit score

  • Receive multiple loan offers

  • Easy-to-use application process is entirely online

Cons

  • Lenders may charge a service fee

  • $10,000 minimum refinancing

Caribou can save borrowers who refinance an average of $116 monthly on their car payments. Interest rates vary depending on credit history.

Vroom

Pros

  • Pre-qualified applicants can determine available financing in advance

  • Partners with a network of lenders to provide financing options

  • The application process is entirely online

Cons

  • Financing is only available on vehicles purchased through Vroom

Vroom offers a wide selection of quality used cars, and partners with a network of lenders to help find you the best financing possible.

MyAutoLoan

Pros

  • Quick online application

  • Determine your interest rate without impacting your credit rating

  • Receive financing in 24 hours

Cons

  • Not available in some states

  • $8,000 minimum loan amount

  • Not a direct loan provider

MyAutoLoan provides up to four immediate loan offers from lenders within minutes of completing their online application.

Gravity Lending

Pros

  • Low refinancing rates

  • Up to a 90-day no-payment window after refinancing

  • Complete the entire refinancing process online, including document signing

Cons

  • Minimum credit score required to qualify

  • Refinancing is only available on vehicles less than 10 years old

Gravity Lending customers save an average of 26% after refinancing their car loans.

CarMax

Pros

  • Get approved in 5 minutes or less

  • Loans allow for co-signers

  • Works with a large network of lenders that can accommodate borrowers with most credit histories

Cons

  • Financing is available only for vehicles purchased through CarMax

  • No negotiation on car prices

  • Higher APRs for borrowers with poor credit

CarMax offers a quick approval process and a large selection of used vehicles. You can receive pre-approval in just a few minutes and complete the entire buying experience online.

Car Loan Guide

Identifying the best interest rates offered by auto loan providers starts by understanding the basics. Separating the best 84-month auto loan rates from the worst doesn’t matter if you don’t know what to pay each month. By having a solid grasp of the fundamental principles behind car loan rates, you’ll have an easier time finding the right financing options for your budget.

What is a car loan rate?

Unless you’re buying a car with cash, you need to secure financing to go through with the purchase. The financial institution that lends you the money to buy a car will charge you an interest rate for that car loan.

The annual percentage rate (APR) is the yearly cost, expressed as a rate, which you agree to pay to the lender on the borrowed amount. APR includes the interest rate as well as any fees the loan might carry.

How does a car loan rate work?

Your lender will calculate the value of the loan and any service fees, additional costs and interest to determine the total amount you need to borrow. Next, they will look at the term, or length of time, you have agreed to pay off the loan. By dividing the total amount borrowed by the term, you can determine the APR of your car loan.

What to look for when you apply

Agreeing to the wrong car loan can cost you money and damage your credit score if you can’t make payments on time. Before signing for a loan, you need to consider a few critical details.

Type of car loan

Do you want to purchase a brand new car or are you in the market for a used car? Are you dissatisfied with your current loan and want to refinance? You should know the type of auto loan you’re looking for before starting your search for companies that offer new car loans, used car loans or auto refinancing companies.

Estimated loan interest payment

Calculating how much interest you will pay on a car loan will help determine whether it’s worth purchasing. If you end up paying more in interest than the car’s value, you may want to reconsider if the purchase makes financial sense.

The following calculation will help you determine the interest payment on your car loan:

  • Interest rate ÷ 12 months x the loan balance = Monthly interest

For example, the monthly interest payment on a $10,000 loan with a 7% APR is calculated as follows:

  • 0.07 ÷ 12 x $10,000 = Monthly interest payment of $58.33

Using this example, you would pay nearly $700 in interest over the first year of your loan.

Auto loan pre-approval

Pre-approval means that a lender has examined factors like your credit history and income and determined your eligibility to receive a loan.

Getting pre-approved for a loan offers several advantages:

  • Lenders will provide you with a dollar amount you’re pre-approved to borrow. This allows you to search for a car within your budget without wondering if you can afford it.

  • With pre-approval, you will know the interest rate and term of the loan before making a purchase.

  • You can easily calculate your monthly payment to ensure you can afford the loan.

If you’re uncertain about how much you can borrow or don’t know what type of interest rate your credit history entitles you to, you should consider getting a pre-approved loan before beginning the car-buying process. This can remove much of the stress and uncertainty when buying a car online or at a dealership.

Flexible loan terms

Loan term flexibility is an important factor when selecting a lender. Customers looking for the best auto loan rates for 72 months may not be interested in a shorter 36-month term or vice-versa.

Auto loan term length also determines the amount of interest a borrower will need to repay on their loan. Longer loan terms generally carry interest rates several points higher when compared to shorter loans.

Credit history and credit score requirements

Lenders will often check your credit history to determine the risk of lending you money. Your credit report will show the lender your history of repaying debts on time and whether you’ve defaulted on a loan or failed to pay a debt.

Your credit history has a numeric value between 300 to 850. The lower your credit score, the higher the risk of loaning to you represents to the lender. Individuals with low credit scores may find it difficult to receive financing or have high-interest rates on the loans they’re eligible to receive.

Certain types of lenders specialize in providing loans to those with low credit scores. Most lenders require a minimum credit score before securing a loan.

Best car loan rates FAQ

How much are car loan interest rates?

Interest rates vary depending on the credit score of the borrower. Interest rates can also vary depending on whether you secure financing through the dealership you're purchasing the car from or a secondary lender. While the APRs found online can provide a good reference point when starting your car loan search, it's important to understand that rates change frequently and should be verified directly with the lender before applying for a loan.

What are good car loan rates?

A good car loan rate depends on several factors: your credit score, whether you're buying a new or used car, the car's condition and mileage, and the car's resale value. Securing a car loan with an interest rate in line with your credit score is only part of determining whether you got a reasonable rate. You also need to consider your car's monthly payment and how easily you can fit that amount into your budget. Even the best rates for auto loans can feel like a bad deal if the loan costs more than you can afford.

How do you find the best car loan rates?

Searching online will help you understand the rates you qualify for and which lenders offer the right combination of loan and term. Most online lenders allow you to start with a pre-qualifying process that won't negatively affect your credit rating. This process will give you the information needed to shop around and make an informed purchasing decision. Don't make the mistake of confusing pre-qualify with pre-approval. Lenders will do a light check against your credit history to pre-qualify, while a pre-approval requires a full credit check. This is significant because multiple full credit checks can potentially cause your credit score to drop.

What are flex loans?

Flex loans offer the advantage of allowing you to make lower monthly payments, more similar to a lease than a typical car loan. These loans allow you to return a vehicle before paying it off with no termination fees or early penalties. If you have a limited budget, flex loans can help you manage a car payment you may otherwise not be able to afford. If you're looking for the best 84-month auto loan rates, then a flexible loan may be right for you. However, flex loans do have some drawbacks. The interest rates on these loans are usually higher, and they may take longer to pay back compared to a traditional car loan. And depending on your loan terms, you may have a yearly maximum mileage you can drive.

How we chose the best car loan rates

We considered several essential factors when creating our list of auto loan best rates and the providers with the most flexible options.

Types of loans

We started by considering the types of loans each lender offers and whether they specialize in certain types of loans.

For this article, we examined loan types that included:

  • New car loans

  • Used car loans

  • Refinancing loans

We looked at lenders who specialized in these areas and created our list based on their available financing options, interest rates and other convenient features.

Auto loan term length

For our list, we wanted to highlight lenders who offered a range of loan terms to better appeal to our readers. By highlighting lenders who offer a wide range of loan terms, we sought to provide the most value to our readers.

The best loans offer the right combination of term and rate, and we sought to identify lenders who offer different loan terms so that our readers would find an option that best met their financial goals.

APR

Interest rate is the essential factor for the majority of buyers. A high APR can mean the difference between getting your dream car or settling on a more affordable option.

Auto loan providers should offer borrowers a competitive APR that matches their credit score. It’s vital that lenders provide credit to borrowers with both high and low credit scores, but identifying lenders that only offer above-market rates helps our readers avoid dealing with less-than-reputable businesses. By only listing lenders who offer reasonable interest rates, we sought to help save our readers time and money.

Ease of application

As part of our criteria, we examined how easily each lender made applying for a loan and whether a borrower’s credit score would take a hit as part of the application process.

Lenders on our list offer a fast and easy application process that only takes a few minutes to complete. Most lenders listed above also offer pre-qualification that doesn’t impact the lender’s credit score.

Summary of Best Car Loan Rates

  • PenFed Credit Union – Best for Flexible Options

  • Consumers Credit Union – Best for Used Cars

  • Lightstream – Best for New Cars

  • Autopay – Best for Refinancing Options

  • Capital One – Best for Personalization

  • CarsDirect – Best for Easy Online Quotes

  • Bank of America – Best for Private Parties

  • Carvana – Best for Bad Credit

© Copyright 2022 Money Group, LLC. All Rights Reserved.
This article originally appeared on Money.com and may contain affiliate links for which Money receives compensation. Opinions expressed in this article are the author's alone, not those of a third-party entity, and have not been reviewed, approved, or otherwise endorsed. Offers may be subject to change without notice. For more information, read Money’s full disclaimer.