What Factors Determine Auto Loan Rates
The rates lenders offer borrowers differ based on a number of factors. Here are the most significant ones:
- : The lowest rates for auto loans are reserved for those with excellent credit, while people with bad credit will have a hard time finding competitive rates.
- : Although your credit score is a reflection of your credit history, theyre not the same thing. Your credit history includes more specific information, such as the percentage of your credit that youre using and your monthly payment history for credit cards and other loans.
- Income: How much money you make, especially in relation to how much you want to borrow, can influence your interest rates.
- Term length: Depending on your situation, you can choose different term lengths that fit your payment needs. While longer term lengths come with lower monthly payments, they also tend to come with higher interest rates.
- LTV ratio: Lenders compare the amount you want to borrow to the amount the car you want to buy is worth.
- Down payment: A larger down payment or a trade-in will reduce the LTV ratio and the interest rate.
Best For Credit Union: Navy Federal Credit Union
- New: Starts at 2.29%, Used: Starts at 2.69%, Refinance: Starts at 2.29%
- Loan range: $250 to $500,000
- Loan length: 12 to 96 months
- Available in all 50 states
Read Insider’s full review of Navy Federal Credit Union.
One of the biggest attractions of a Navy Federal auto loan is the credit union’s low interest rates. Navy Federal also features an online Car Buying Center, where the company walks you through the process of financing, buying, researching, and insuring your next car.
Good For Bank Of America Loyalists: Bank Of America
Preferred Rewards members may qualify for a rate discount of up to 0.5%. Additionally, you can apply online for a Bank of America auto loan before youve chosen a car and lock in your rate for 30 days while youre shopping around. If youre still figuring out your budget, this can help you decide how much you can afford.
Cons Of Buying From A Private Seller
- No warranty: Most private sellers can’t offer you a warranty. This could prove a deal-breaker for drivers who fear mechanical problems. If you’re buying a newer car from a private seller, check to see if there is a warranty and if it is transferable.
- More paperwork: When buying a used car from a private seller, it’s your job to get the title and registration in order with your states motor vehicles department. Dealerships usually handle this paperwork for you. They can also offer or recommend financing options and take your old car off your hands in the form of a trade-in.
- Buying from a stranger: When purchasing from someone you don’t know, there’s always the possibility of being scammed or lied to. Dealers are subject to consumer protection laws that dont affect private sellers. If issues begin popping up shortly after purchase, you could be out of luck. Even with the law on your side, it may be hard to track down the seller after completing the deal.
Private Party Auto Loan: What It Is And How It Works
With a private party auto loan, a lender loans you money to buy a car from a private seller. You must select the car you want to buy before applying for financing. If approved, the lender typically pays the seller or lienholder the amount you owe, then you repay the lender, with interest, over the term of the loan.
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Best Overall: Penfed Credit Union
PenFed Credit Union
- As low as 4.24%
- Minimum loan amount: $500
PenFed Credit Union provides some of the best rates available. It also has flexible loan amounts and a number of auto loan options for members. Even though membership is required, a disadvantage for some, PenFed makes the requirements to join fairly straightforward.
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 125% on new and used vehicles
High minimum loan amount for longer terms
Excellent credit history required for lowest rates
Membership in the credit union is required
Our top pick for auto loan rates, PenFed Credit Union, offers some of the lowest rates available.
At PenFed, rates for 36-month refinance loans start as low as 4.24%. Deep discounts are available for members who use the credit union’s car buying service, with rates starting as low as 3.44% annual percentage rate for a new car and 4.64% APR for a used vehicle.
You’ll have to become a member of the credit union, but the requirements to join are fairly easy to meet. Car loans from PenFed start as low as $500 and move up to $150,000, a wide range that beats out many of the lenders we surveyed.
Should I Get A Private
An unsecured personal loan may be an alternative to a private-party auto loan, but a private-party loan may be the less expensive option. Unsecured personal loans often have higher interest rates because the loan isnt backed by collateral, like a car.
While a personal-loan interest rate can range from around 4% to 36% or more, a report from credit bureau Experian showed that average used-car interest rates in the fourth quarter of 2020 ranged from 3.8% to 20.3%.
Also Check: Where Does Federal Student Loan Money Come From
Important Legal Disclosures And Information
Certain restrictions and conditions apply.
Automated payment must be set up at loan closing from a PNC checking account to qualify for the 0.25% discount. If automated payment is discontinued at any time, you may no longer receive an automated payment discount and your rate will increase 0.25%
May exclude weekends and holidays.
PNC is a registered mark of the PNC Financial Services Group, Inc.
*Check Auto Loan Rates: APRs that will display include a 0.25% discount for automated payment from a PNC checking account. The lowest rates are available to well-qualified applicants. Your actual APR will be based upon multiple factors. Refer to Important Disclosures” under Get Rates for more details.
Bank deposit products and services provided by PNC Bank, National Association. Member FDIC
How To Apply For A Private Party Auto Loan
After you find the vehicle you want to buy from a private owner, be prepared to provide a lender with basic personal details, including:
- Your full name, birthdate, address, Social Security number and contact information.
- Employment and income information.
- Current debt obligations, such as a mortgage.
You should also have ready certain documents and details about the vehicle you want to buy, including:
- Make and model, model year and mileage.
- The vehicle identification number, or VIN.
- Bill of sale that details the purchase agreement.
- Copy of the vehicle registration.
- Copy of the vehicle title.
- A written payoff quote from the sellers lender, if applicable.
Lenders have different requirements for the borrower and the car that will secure the loan. You should be able to find out what those requirements are before you apply.
If your credit isnt good, consider holding off on the purchase until you improve your credit score. Waiting a few months wont transform your credit from poor to perfect, but it can make enough of a difference to earn you some savings on the interest rate and monthly payments.
Best Overall Private Party Auto Loan
You can submit your financing needs to myAutoloan.com and the lending network will shop your prequalifying form to a host of partner lenders. Qualified applicants can receive up to four loan offers in a matter of minutes.
Once you choose your preferred loan, you can receive an online certificate or check within 24 hours.
The network provides a host of free online tools to help you find the loan that best meets your needs and financial situation. When youre ready to apply, youll need to provide basic information that includes your name, address, time at the address, Social Security number, and employment and income information. Youll also need to state your requested loan amount and information about the financed vehicle and its seller.
The Dealership I’m Shopping At Offers Financing Should I Just Use That
Car dealerships are allowed to mark up interest rates on auto loans that they offer, and generally, they do. The interest rate a salesperson offers often includes a cut for the dealership, resulting in a higher interest rate for you. While you might qualify for an interest rate of 6% from a bank, you might see 6.5% or even 7% from a dealership, for example.
If you’re willing to put some work in, you may be able to save by shopping around on your own. The best way to avoid this issue is to get pre-approved by a few banks or lenders as you start car shopping, and take those pre-approvals to the dealership with you. Then, you’ll have a few estimates on what your cost to borrow could be, and can comparison shop for the lowest APR.
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Pros And Cons Of Buying From A Private Seller
Now that you know how to buy a car from a private seller, it’s time to determine whether or not you should. Consumers differ in wants and needs which makes it hard to declare an outright superior car buying option. Therefore, it helps to run through the pros and cons of buying from a private seller when trying to decide your next move.
Servicemembers Civil Relief Act
The SCRA provides financial relief and protections to eligible servicemembers and their dependents. PNC is grateful for your service and we would like to help you understand your benefits and protections under SCRA as well as other similar benefits that PNC may be able to provide to you.
To find out more, please contact us at:
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What Should You Consider When Choosing An Auto Loan
In a recent interview with Kathryn J. Morrison, consumer affairs expert and instructor at South Dakota State University, she said “When shopping for an auto loan, one needs to consider more than just the interest rate. Are there any additional fees that you will be charged? Do you need to have a down payment to qualify for this rate? What is the total loan amount, and how much interest will you be paying over the life of the 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 Q2 2021, the average credit score was 732 for a new-car loan and 665 for a used car loan, according to a report from Experian.
In Q2 2021, 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 2.34% for new cars and 3.66% for used cars. Prime borrowers with a credit score between 661 and 780 received an average APR of 3.48% for new loans and 5.41% for used loans, while nonprime borrowers with credit scores between 601 and 660 received an average APR of 6.61% for new car loans and 10.49% for used.
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.
What Is A Private Party Auto Loan
A private party auto loan allows you to borrow money to buy a vehicle from a private seller, as opposed to a dealership. Here are some reasons you might want one:
- The car you want is only available through a private party
- Dealerships donât offer cars in your price range
- The same car is often less expensive when you buy it from a private party instead of a dealer
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Tips For Buying A Vehicle From A Private Seller
Auto dealers often provide warranties when you purchase a new vehicle. Even smaller guarantees, such as 30 days from the date of purchase, can provide some peace of mind when you drive your new car off of the lot.
But private parties arent required to provide any backing. These as-is sales mean youre on the hook for any repairs or other costs the car incurs even if youve only had the car for a few minutes.
Dont let that discourage you from making a private party auto purchase. If you follow the steps below, you could save thousands on your new vehicle, while avoiding the hassles often associated with shopping at a dealership.
Best For New Cars: Pnc Bank
- From dealer: 2.14% to 14.54%, From private party: 4.64% to 21.04%, Lease buyout: 3.64% to 20.04%, Refinance: 2.64% to 19.04%
- Loan range: $5,000 to $100,000
- Loan length: 12 to 72 months
- Available in all 50 states
Read Insider’s full review of PNC Bank.
PNC offers great rates for borrowers who have good credit. The bank offers financing for cars model year 2014 or newer if you want to buy an older car, you won’t be able to get a loan through PNC.
Borrowers with a poorer credit history may find it hard to qualify at all or might be saddled with high interest rates.
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How To Get A Private Party Auto Loan
Before seeking a private party auto loan, check your credit report and credit score. A good credit score can help you qualify for better loan terms. If your credit is fair or poor, try to improve it before applying for an auto loan.
You can get private party auto loans from banks, credit unions and online lenders. Start with your existing bank or credit union then shop around to find the best offer. Bank of America, PNC, LightStream and MyAutoLoan are popular sources of private party auto loans.
In addition to your personal information such as employment and income, applying for a private party auto loan requires information about the specific car you want to buy. This may vary depending on your state laws, but typically includes the vehicle identification number a copy of the vehicle registration and title a bill of sale listing the details of the purchase and a payoff quote from the current lender.
The age and price of the car you’re financing, the amount you’re borrowing and the length of the loan can all affect the amount you’ll pay for the loan. For instance, older cars are less valuable as collateral, so you’ll generally pay higher interest rates to finance them. Shorter loan terms generally translate to lower interest rates. Some lenders have criteria limiting the age or mileage of vehicles they’ll finance or won’t issue loans for less than a certain amount.
How Do You Get A Car Loan
Some consumers can pay cash for a new vehicle, but most use financing from a bank, credit union, nonbank auto lender, or dealer. Here are steps you can take in order to get a car loan:
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Local Bank Or Credit Union
Some local banks and credit unions provide private party auto financing, but these institutions typically arent in a hurry to approve applicants who have bad credit.
Bank of America, for example, provides these types of loans, but theyre often far slower to close because the bank has to do its due diligence to research the vehicle and seller before approving any financing.
Plus, banks often add extra loan fees to offset the risks associated with purchasing a car that doesnt come with a dealer warranty. That means you often lose the savings associated with a non-dealer purchase.
How Do I Get A Private
Private-party loans are offered by some large financial institutions, like Bank of America, as well as some smaller, regional banks, and online lenders. Keep in mind that some lenders have restrictions on vehicles theyll finance, like age or mileage or they may charge a higher interest rate on older vehicles or those with a lot of miles.
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Save Thousands On A Private Party Sale
Dont let your bad credit keep you from getting the car you need. While banks prefer you shop for a vehicle at a dealership, you could save thousands of dollars by skipping the dealerships fees and add-on packages and purchasing your car from a private seller.
While financing such a purchase may require a little extra work, youll find many online lending networks, like those listed above, eager to provide private party auto loans for bad credit. That gives you more time to enjoy your new vehicle without worrying about financing hurdles.