How To Get The Best Auto Loan Rates

The average auto loan in America is about $30,000 at a 60 month loan term. With an interest rate of 3.0%, you’ll pay a total of $2344 in interest over the life of the loan. But if you increase the rate to 6%, that interest expense balloons to $4799. That’s $2445 more or almost 10% of the original purchase price!

As you can see, getting the best rate on your auto loan can make a big impact on your wallet.

What’s the best way to get the cheapest rates on an auto loan? Here’s what you’ll need to know.

How do I get approved for an auto loan?

The first thing creditors will check (aside from your income) is your credit score, so you want to ensure yours is accurate. Errors are fairly common on credit reports, so request a free copy of your credit report from a free credit reporting service and dispute any errors, if needed. If you don’t need a car right away, take some time to boost your credit score into the 750+ range, which is where you want to be to get the best auto loan rates.

Next, shop around for rates at banks and credit unions, both local and online. Try to do all of your shopping within a 14-day period, because each credit inquiry will be recorded on your credit report as hard credit pulls. Normally these will drop your score by a few points each, but if you complete them all within a 14-day period, they’ll be recorded as a single credit pull on your report and you’ll minimize any damage to your credit score.

Finally, select the best rate and get preapproved for the loan if possible. This is important because it tells the car dealer that you’re a serious buyer, and it will streamline your entire car buying experience. You may even be able to use it as a bargaining chip in negotiations.

What are good auto loan rates?

Auto loan rates depend on a few factors, such as whether it’s a new vs. a used car, and how long the term is (i.e., how long you’ll be paying off your loan).

In general, though, anything under a 4.5% annual percentage rate (APR) is considered good.

If you can, try to take out a 36-month loan rather than a 48-month or a 60-month loan, because interest rates for these types of loans are generally about 0.5% less. In our loan example from above, a change in APR from 3.5% to 3.0% and a change in length from 60 months to 36 months will save you $446 in interest payments (though you will have larger monthly payments because of the shorter term).

How do I choose the right lender?

Finding the right lender doesn’t have to be challenging. As you shop around for your rates, you can check out SuperMoney’s auto loan reviews and comparisons page, as well as check with the Better Business Bureau. Steer clear of any institutions with poor ratings.

Avoid shopping for an auto loan with any dealers before you go there to look for cars. They know that most people don’t shop for rates, and therefore they’ll be happy to provide you with an auto loan — at a much higher rate than you’ll get elsewhere. Some dealers even make more money by financing auto loans than from actual car sales.

If you’ve been preapproved for an auto loan from another institution, however, make sure to mention this fact to the auto dealer. Sometimes they’ll be willing to negotiate the price of the car or even give you a better rate on an auto loan. Some dealers may even offer you 0% financing just because they want to sell the car.

Where do I apply for an auto loan?

This depends on which institution you ultimately end up choosing for your auto loan. If you’ve been preapproved for a loan and you decide to use it (remember, you don’t have to, if you get a better offer from the car dealer), simply notify the institution once you’ve picked out a car.

If it’s an online bank or credit union, you can call them or notify them online. If it’s a local bank or credit union, you can go visit their local branch or call them. If you decide to get your loan through the auto dealer, they can take care of the application while you’re there.

How do I apply for an auto loan?

You’ll need a few pieces of information. Some lenders require other pieces, and some require less, but this is what you’ll probably be asked for:

  • Proof of income (pay stubs or tax returns)
  • Bank statements
  • Proof of residency (mail with your name on it, or a driver’s license)
  • Vehicle information
  • Proof of insurance (you’ll need to get it before you drive off the lot anyway)

Sometimes auto loan rates fluctuate with market conditions. If you’re in the market for an auto loan, be sure to check our list for the current lowest rates being offered.

Featured Auto Lenders

Lending PartnerMinimum APRLoan Amount 
2.19% APR (with AutoPay)*$5K to $100K*Apply
1.99% APR*$10K to $100K*Apply
5% APR*$7.5K to $45K*Apply
1.99% APR*Up to $15K
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