$20,000 Auto Loans – The Definitive Guide
JW
Last updated 03/14/2024 by
Jessica WalrackIs it time for a new car? Are you thinking about something in the $20,000 range? If you don’t plan on paying cash, you’ll need to find an auto loan. But you shouldn’t take the first one you see.
Too many Americans end up overpaying because they take the first loan they find. But there’s a better way. If you take some time to do a little comparison shopping, you can usually find a much better deal.
In this definitive guide to $20,000 auto loans, you’ll learn:
- How to determine if a $20,000 auto loan is right for you.
- What you should consider when comparing auto loans.
- Which top cars cost less than $20,000.
- How to find the best $20,000 auto loan for you.
Let’s get started.
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Is a $20,000 auto loan right for you?
Not sure how much you should borrow? We’ll teach you how to calculate how much you can comfortably afford.
How much should you spend per month?
Your monthly payment will depend on your loan’s term, annual percentage rate (APR), credit score, and car type (new or old). Plus, rates and terms vary from one lender to the next. As such, you’ll need to get quotes from at least three different lenders to get a clear sense of your options.
In general, you should not spend more than 10% of your take-home pay on your auto loan’s monthly payment. For example, if you earn about $4,000 for a month (after taxes, benefits, and voluntary contributions), your monthly car payment shouldn’t exceed $400. If you net $2,000 per month, your car payment shouldn’t exceed $200.
How much can you afford overall?
Take a look at the way that your credit score and interest rate affect your monthly payment amount. The following estimates assume that you’re taking out a 5-year loan for a used car.
| Credit Score | Average APR | Estimated Loan Amount |
|---|---|---|
| 300-500 | 19.51% | $15,254 |
| 501-600 | 16.72% | $16,193 |
| 601-660 | 10.63% | $18,554 |
| 661-780 | 5.94% | $20,720 |
| 781-850 | 4.19% | $21,619 |
As you can see, if your credit score is poor (300-500), you’ll have to pay a good deal more in interest. To keep your monthly payment at or below $400, you’d have to extend your loan term or settle for a smaller loan.
After reviewing the rates, terms, and loan amounts of a few auto loan offers, you will be able to determine if a $20,000 loan is a good fit for your budget.
How do you compare $20,000 car loans?
Have you decided that a $20,000 auto loan is right for you? Then it’s time to shop around! When you do, you’ll want to assess multiple factors to find the best overall deal.
Auto loan comparison factors
Here’s what to consider:
Total cost
Calculate the total cost of the loan, including all fees and interest costs over the entire term of the loan.
Monthly payment amount
Consider the monthly payment amount and decide if it suits your budget. And don’t forget the 10% rule!
Interest rate
Get quotes to see what interest rates you qualify for. Always look for the lowest APR available.
Loan amount range
Check each lender’s offered loan range to confirm that it accommodates your needs.
Loan terms
Look for a company that offers a variety of loan term lengths.
Fees
Take note of which fees are charged and how much they cost. Keep an eye out for late fees, prepayment penalties, origination fees, and more.
Reputation
How is the lender’s reputation? Has the company been in business long? Are past customers satisfied with the service they received? Look for a lender with a reputation for providing quality service end-to-end.
Convenience
How easy is it to find information, get a quote, originate the loan, manage your account, etc.? Does the lender provide a convenient web platform? A mobile app? Can you reach them when you need to? How long does it take to get the loan once it’s approved? All of this will contribute to a seamless loan experience.
Credit score range
Lastly, most lenders cater to a particular segment of borrowers. It’s helpful to know what credit score range a lender serves so you can find the best fit. For example, if you apply with a lender that caters to customers with excellent credit and your credit is fair, you might not get approved. However, you could get approved elsewhere.
Keep all of these factors in mind as you get quotes and compare offers. The best offer will provide you with the most benefits and fewest costs.
Top vehicles under $20,000 in 2020
Still looking for the right car to keep you under the $20,000 mark? Here are some of the top new and used cars on the market in that price range.
New cars
(All 2019 models)
- Honda Fit – $16,190.
- Kia Forte – $17,790.
- Honda Civic – $19,750.
- Chevrolet Cruze – $16,120.
- Hyundai Accent – $15,195.
- Volkswagen Jetta – $18,895.
- Kia Rio – $15,750.
- Hyundai Veloster – $18,600.
Used cars
(All 2016 models)
- Volkswagen Tiguan – $16,235.
- Lincoln MKZ – $19,855.
- Chevrolet Impala – $17,745.
- Fiat 500 – $11,469.
- Kia Optima Hybrid – $16,381.
- Ford Taurus – $17,587.
- Hyundai Sonata Hybrid – $16,303.
- Ford Fusion Hybrid – $14,844.
As you can see, you have no shortage of options! Keep in mind that these prices are estimates based on industry research. Actual prices will vary by location and dealer/seller.
New vs. used cars
Not sure whether you should opt for a new or used car? Both have their pros and cons.
New cars
There’s nothing quite like the smell of a brand new car. Everything should work correctly, with no unpleasant surprises. And if it doesn’t, you have a warranty to back you up! But there is a downside.
New cars lose about 20% of their value as you drive them off the lot, 30% by the end of the first year, and 50% by year three. That means if you buy a $20,000 new car, you will usually lose about $10,000 in depreciation within three years.
Used cars
Used cars have their own issues. If they have a lot of miles on them, you may have to invest in expensive repairs. Before you buy a used car, be sure to check maintenance records, get an inspection from a trusted mechanic, and pull the carfax. But once you find a vehicle that checks all your boxes, you can save money by avoiding the massive depreciation of new cars.
Both new and used cars have their pros and cons. If the perks of a new car are worth the depreciation costs, then go for it. If not, put in a little more work to find a good used car and keep more money in your pocket.
Compare $20,000 auto loans
Ready to shop car loans and find the best $20,000 loan for your next ride? SuperMoney’s auto loan engine makes it quick and easy. Fill out a single form online and, in minutes, you’ll receive multiple personalized offers side-by-side. Then, compare the offers according to the factors above to see which is the best deal!
Get offers now and let the lenders compete for your business.
JW
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.
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