Best Car Loan Companies

We chose our top picks car lenders by comparing possible loan amounts, credit score requirements and overall loan experience. In order to be chosen for a feature, the loan company had to offer the specified services and provide transparent information about its lending processes on its website or through its customer service department. All information is accurate as of publishing.

Why we like Bank of America’s car loans: Bank of America is a nationwide lender that offers in-person and online services, making it a solid option for both kinds of shoppers. Its car loans are ideal for new and used car purchases, and it has specialized financing options for small business vehicles.

Why we like PenFed Credit Union’s car loans: Pentagon Federal Credit Union, also known as PenFed, has financing for new and used cars as well as a car buying service powered by TrueCar. Its online car loan rate calculator gives you an estimate of your monthly payments based on your vehicle’s purchase price, down payment amount, loan term and interest rate. PenFed also offers great add-ons for car buyers, including an extended warranty program and gap protection for qualifying car purchases.

Why we like Carvana’s car loans: Carvana combines used car lending and purchasing on its website, which lets you shop and finance your vehicle on one platform. Carvana has an efficient tool that lets you calculate how much car you can afford and determine what your monthly car payments will be based on your desired loan amount.

Why we like LightStream’s car loans: LightStream markets its online car loan process as simple and quick. Some borrowers are eligible for same-day loan funding. LightStream offers loans from as low as $5,000 up to $100,000, making it a solid option for borrowers with a variety of needs. LightStream also has a “Lending Uncomplicated” program that simplifies the lending process and lets you apply from your smartphone or tablet. Borrowing $10,000 at 8.99% APR with a term of five years would result in 60 monthly payments of $207.54

Why we like LendingTree’s car loans: LendingTree’s online loan marketplace lets you compare car loan rates from multiple lenders. Fill out its online form, and you’ll be matched with up to five lenders. Its service is completely free for borrowers, making it a great and easy tool to compare rates and fees.

Why we like Auto Credit Express: If you have a less-than-ideal credit history, Auto Credit Express may be the right lending platform for you. It specializes in helping consumers with bad credit find car loans by working with dealerships nationwide that provide special financing options. Auto Credit Express walks you through the bad credit loan application process and provides resources to help you improve your credit score.

Getting a car loan is similar to other lending processes. While comparing car loan companies can seem overwhelming, finding a lender who offers competitive rates and terms saves you money over the course of your loan.

1. Determine how much you can afford

Before searching for financing, it’s important to determine how much car you can afford. The right car loan amount for you varies based on the stage of life you’re in, your financial situation and how large of a down payment you can make. Take some time to examine your current financial responsibilities. If you’re repaying student debts or making other loan payments, borrowing a smaller amount with a shorter loan term and lower interest rate may be the right choice for you.

2. Check your credit score

Your credit score is a significant factor in determining your rates for a car loan. You can check your credit score by using a variety of online credit reporting services, and many credit card providers have free credit score monitoring services. Also, everyone is allowed one free copy of their credit report each year, which gives an in-depth look at what’s on your credit report but does not provide a credit score.

Generally, consumers with high credit scores tend to receive lower car loan rates and better terms from auto lenders, while consumers with lower credit scores can have a difficult time finding a lender that offers affordable payment options. While buying a car with bad credit is possible, we recommend taking time to improve your credit score before purchasing a vehicle if you can.

3. Compare rates from multiple auto lenders

With so many car lenders out there, researching and comparing rates can seem like an overwhelming task. Start by applying for a car loan from each of the four types of lenders (banks, credit unions, online lenders and dealership financers) and comparing available interest rates and loan terms. Even if you plan to use a specific lender, it’s worth it to apply with multiple auto loan companies so you can negotiate your car loan rate with your preferred lender.

There are a few different types of car loans available. Read about the available loan types below to see which one is right for you.

• Secured auto loans: Most auto loans are secured loans that use the car being purchased as collateral. Secured auto loans tend to have lower interest rates, but the lender can take possession of the vehicle or property you put up as collateral if you stop making payments.
• Unsecured auto loans: Unsecured loans don’t involve collateral. Given the risk involved, these loans normally have higher interest rates than secured auto loans and require a good credit score.
• Precomputed interest loans: Precomputed interest loans have precalculated interest and principals that are determined before a borrower and lender agree and sign the financial paperwork.
• Simple interest loans: Most car loans are simple interest loans. These loans use the amount you owe at the time of payment to determine how much interest your lender charges.
• Lease buyout loans: A lease buyout loan is an option for borrowers that are unable to buy out the remaining amount on their car lease. A commercial lender will pay out the remainder of the balance on their lease, and the borrower will need to make regular payments to the lender.
• Car refinance loans: Car refinancing is a great option for car owners who want a lower interest rate on an existing car loan. If you’ve recently raised your credit score, refinancing can be a great way to lower your monthly car payments.

Car loan requirements

Before committing to work with a car lender, be sure you're familiar with the company’s lending requirements. Lending requirements differ depending on the auto financing company you choose to work with but can include:

• Minimum loan amount
• Minimum income amount
• Minimum down payment percentage
• Minimum credit score

If you’re currently working with a car lender, be sure to ask about the requirements above in order to avoid any extra fees or charges.

Auto loan rates vary depending on a few factors, including income and desired loan amount, but one of the most important factors in determining your car loan rate is your credit score.

Know the terms of the car loan

Before you dive into the financing process, take some time to familiarize yourself with the language used in car lending.

• Annual percentage rate (APR): Loan companies offer different annual percentage rates based on an applicant's credit history, financial background and other factors. The lower your APR, the less you’ll pay over the life of the loan.
• Monthly payments: Your monthly payment is the amount you’ll be billed each month. Generally, if your monthly payment is higher, you’ll be able to pay off your car loan quicker.
• Short-term auto loans: Companies that offer short-term auto loans give customers a maximum amount of weeks in which they can pay the loan. They often do not have fixed dates for repayment installments, simply a date by which the total must be repaid.
• Total cost: The total cost of a vehicle is calculated by knowing the loan amount, interest rate and length. A common mistake with car loans is to focus on the monthly cost of the car payment and lose sight of the overall total cost of the loan. Make sure you know the total you are willing to pay for the car before you focus on monthly rates.

Many different loan providers offer car loans, and you may need to do some research to discover which is best for you. Be sure to apply for loans at a few different types of lenders to understand what each type is willing to offer.

Banks

Many banks and large financial institutions double as lenders and have specialists that work on auto loans. Instead of working with other lending institutions, these companies typically supply the loan money themselves.

Dealership partners

Some companies partner with dealerships directly to connect with consumers, check lenders’ credit histories and set them up with a new or used car and a special loan repayment schedule. These companies are different from lenders that actually offer the loan money and approve it themselves — they work with dealerships to help consumers get approved for the loan through the dealership.

Poor credit specialists

Many auto loan companies specialize in working with customers with poor credit or those who have just gone through a bankruptcy. These companies can often help negotiate loans and secure better terms than if borrowers go directly through a car dealership.

Refinancers

Many auto loan companies work with other lenders to refinance those lenders' existing loans. Refinancers can usually offer lower fees and better terms. Depending on where you live, it is a good idea to find an auto loan that has rates that are both locally competitive and nationally competitive.

Credit unions

Credit unions only lend money to their members. They are nonprofit organizations, so they often have very competitive lending rates. It’s always an advantage to have a personal relationship and history of being part of the credit union.

Dealer financing

Manufacturers may have their own credit companies or relationships with banks that can offer better rates. Make sure to compare all offers before choosing one.