Best Car Loans and Lenders for August 2022

Best Car Loans and Lenders for August 2022

Finding the best rates and terms on a car loan can help you save hundreds or even thousands in interest. With interest rates rising and the cost of car insurance premiums increasing, it's important to shop around with different lenders to find the most affordable car loan for your new or used car.

An auto loan is a secured installment loan, which means the vehicle you purchase acts as collateral and can be subject to repossession if you fail to repay the loan. But the trade-off is a lower interest rate than with unsecured borrowing, such as a personal loan. You can apply for a car loan at a car dealership, bank, credit union or through an online lender. 

We'll lay out some of the basics here. Plus, we've evaluated the major national auto loan providers and highlighted the best options for new, used and private party (purchase of a car from a private seller) loans below. We'll update this list regularly as terms change and new loan products are released. Note that all the starting APRs listed assume an "excellent" credit score of 800 or above.

Rates as of Aug. 3, 2022.

PenFed Credit Union

• APR: Starting at 3.44% (new car loans through PenFed Car Buying Service), 4.84% (used car loans through PenFed Car Buying Service); Loans outside of this service start at 4.24% (new car loans) or 5.04% (used car loans) 
• Loan amounts: $500 to $100,000
• Loan terms: 36 to 84 months
• Minimum annual income: Not specified
• Availability: 50 states
• Prepayment penalty: No

Pentagon Federal Credit Union is a credit union that offers low auto loan rates for both new and used cars, through the PenFed Car Buying Service. You'll need to become a credit union member to use this service, but membership is open to everyone, and requires opening a savings account with a minimum $5 deposit. If you're not interested in using PenFed's program to buy a car, you can still secure lower-than-average rates on new and used cars purchased outside of the service.

With flexible loan terms extending up to seven years, nationwide availability and no prepayment penalties, PenFed is the contender to beat in the auto loan industry.

Consumers Credit Union

• APR: Starting at 3.49% (car loans for 2020 or newer vehicles) and 3.74% (car loans for 2016-2019 vehicles)
• Loan amounts: $250 to $100,000
• Loan terms: 0 to 84 months 
• Minimum annual income: Not specified
  
• Availability: Branches across Illinois, shared branches nationwide
• Prepayment penalty: No

Consumers Credit Union is an Illinois-based credit union that has recently opened membership nationwide. Though its auto loan rates for vehicles made prior to 2020 are average for the market, their new car loan rates are a great deal. Consumers Credit Union also offers significant flexibility, with the widest range of loan terms and amounts of the providers we evaluated.

You can become a member online with a valid ID, two recent pay stubs, two tax returns from recent years, five references, two utility bills and a one-time $5 fee to the Consumers Cooperative.

Lightstream

• APR: Starting at 3.99% (new and used car loans) and 4.99% (private party car loans) with Autopay 
• Loan amounts: $5,000 to $100,000
• Loan terms: 24 to 84 months
• Minimum annual income: Not specified
  
• Availability: Online
• Prepayment penalty: No

LightStream is an online lender under Truist Financial that offers low rates for private party car loans. Though its loan amounts and terms are of average flexibility, it offers a variety of auto loan options. It places no restrictions on model year, make or mileage, making it the ideal lender if you plan to purchase an older car. LightStream's slogan, "Lending Uncomplicated®," promises a simplified lending process that includes being able to fund your loan the same day you apply, under certain conditions. 

In order to access LightStream's best terms, you'll need to sign up for AutoPay. LightStream's lowest rate loans are also unsecured -- so your car won't be repossessed if you can't make your payments, but your credit will suffer. 

Bank of America

• APR: Starting at 4.24% (new car loans), 4.44% (used car loans), and 7.19% (private party loans)
• Loan amounts: $7,500 ($8,000 in Minnesota) to $100,000
• Loan terms: 48 to 72 months
• Minimum annual income: Not specified
  
• Availability: 50 states
• Prepayment penalty: No

As one of the world's largest banks, Bank of America offers unbeatable availability and great rates. Though you don't need to be a member of Bank of America to use its auto loan services, members may qualify for special perks. For example, if you qualify for Bank of America's Preferred Rewards program -- based on your qualifying combined balances in your BOA deposit and/or Merrill® investment accounts -- you can be eligible for up to 0.50% off your APR. 

But Bank of America's loan policies can lack variety. For example, it offers one of the least flexible loan terms on this list, with the shortest loan term set at 48 months. In addition, the minimum financing amount is $7,500, which rules out Bank of America as a loan financier for more inexpensive used vehicles.

U.S. Bank

• APR: Starting at 4.49% (for new and used car loans)
• Loan amounts: $5,000 to $100,000
• Loan terms: 12 to 72 months
• Minimum annual income: Not specified
  
• Availability: Branches in 26 states
• Prepayment penalty: 1% of the original loan amount, with a minimum charge of $50 and a maximum of $100

U.S Bank offers interest rates as low as 4.89% for both new and used cars, which makes it a great lender for those purchasing preowned vehicles. If approved, the U.S Bank offers financing of up to 120% of your car's value, with no down payment required. 

However, to lock in the lowest used car rates, you'll need to meet specific criteria: Next to have excellent credit, you must have a loan-to-value ratio of 80% or less, buy a used car that's less than 1 year old, have a loan amount of at least $30,000, a loan term of 36 months or less and an automatic payment set up from a U.S. Bank account. Though these requirements are stringent, the low auto loan rates make them worth it for certain buyers. 

What are the drawbacks? U.S. Bank's availability is limited to 26 states. Plus, it charges a prepayment penalty of 1% of the original loan amount if you pay off your loan within a year's time. 

Carvana

• APR: Starting at 3.9% (used cars only)
• Loan amounts: Not specified
• Loan terms: 36 to 72 months
• Minimum annual income: $4,000
  
• Availability: Not available in Alaska or Hawaii
• Prepayment penalty: No

Though Carvana is mostly known for its online used car shopping experience, it also offers auto loans on vehicles you buy through the site. Carvana's only requirements are that you're over 18, make $4,000 annually and have no active bankruptcies, so it's a great choice for those with poor credit. Furthermore, Carvana's wholly online model combines the buying and financing experience, making the process of purchasing a used car relatively painless. 

However, though Carvana makes it possible for customers with bad credit to obtain a loan, the best auto loan rates will always be reserved for those with excellent credit – and it's important to note that it offers, by far, the highest starting APR on our list. 

Best car loan lenders, compared

Lenders	PenFed CreditUnion	Consumers Credit Union	LightStream	Bank of America	U.S. Bank	Carvana
Best for	New car loans	Used car loans	Private party car loans	Big bank option	Short loan terms	Those with poor or no credit
APR for new car loans	Starting at 3.44% (through PenFed Car Buying Program)	Starting at 3.49 (car loans for 2020 or newer vehicles)	Starting at 3.99%	Starting at 4.24%	Starting at 4.49%	N/A
APR for used car loans	Starting at 4.84% (through PenFed Car Buying Program)	Starting at 3.74 (car loans for 2016-2019 vehicles)	Starting at 3.99%	Starting at 4.44%	Starting at 4.49%	Starting at 3.9%
APR for private party loans	N/A	N/A	Starting at 4.99%	Starting at 7.19%	N/A	N/A
Loan amount	$500 to $100,000	$250 to $100,000	$5,000 to 100,000	$7,500 ($8,000 in Minnesota) to $100,000	$5,000 to $100,000	Not specified
Repayment terms	36 to 84 months	0 to 84 months	24 to 84 months*	48 to 72 months	12 to 72 months	36 to 72 months
Credit requirement (estimate)	Not specified	Not specified	Good to Excellent	Not specified	Not specified	Accepts all credit, no active bankruptcies
Availability	All 50 states	Branches across Illinois, shared branches nationwide	Online	All 50 states	Branches in 26 states	Not available in Hawaii or Alaska

What to know when applying for an auto loan

While car loans usually have fixed interest rates and loan terms, they can often be negotiated, depending on your lender. Your loan rate will generally depend upon your credit score -- the higher your credit score, the lower your annual percentage rate. A higher credit score may also give you access to a larger loan amount or more favorable repayment terms.

Next, you should consider loan terms. Let's say you qualify for a 2.5% APR loan. You'll pay less interest over time with a shorter term loan, but your monthly payments will be higher. Similarly, you'll pay more in interest over time with a longer loan term, but your monthly payments will be lower. Consider your budget and financial goals to determine which loan term will work best for you.

As you consider lenders, find out if they offer a preapproval process. Preapproval allows you to see the rates you qualify for without a hard inquiry -- when a creditor pulls your credit history -- which can cause your credit score to slightly dip. It also allows you to review options upfront without having to commit to a particular lender.

Lenders reviewed:

• Autopay
• Bank of America
• Capital One
• Carvana
• Chase
• Consumers Credit Union
• LightStream
• MyAutoLoan
• PenFed Credit Union
• PNC
• U.S. Bank

*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rates range from 3.99%-10.49% APR w/AutoPay. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.

Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of 3 years would result in 36 monthly payments of $295.20.

© 2022 Truist Financial Corporation. Truist, LightStream, and the LightStream logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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Buying a Home or Refinancing? Here's How to Find the Right Home Loan

Buying a Home or Refinancing? Here's How to Find the Right Home Loan

Navigating the world of home-buying could be an Olympic sport. There are so many different regulations, guidelines and fees to keep track of -- and by the time you master one part, there are new rules to learn. And, with mortgage rates predicted to continue rising, particularly as the Fed looks to increase rates as early as March, locking in a rate sooner rather than later may save you tens of thousands in interest.

When searching for the right home loan, you're bound to come across many options. But not every mortgage is right for every person -- you'll want to learn more about the different types of home loans to decide which one is right for you. This guide will help break down several of the most common home loan types, while explaining what's required for approval and who each type is best for.

Read more: Mortgages, Credit Scores and Down Payments: 5 Things to Know Before Buying a Home

1. Conventional loan

What it is: A conventional loan is a loan that isn't backed by a government agency. These are the most common type of loan. Conventional loan terms come in 10-, 15-, 20- and 30-year terms, with 30-year terms being the most popular option.

What you need: You can get a conventional loan with as little as 3% down payment and a 620 credit score. But the lower your credit score, the more money you might need for a down payment.

Who it's good for: The majority of home loans -- around 75% -- are conventional loans, so it's good for most people. You can use it for your first home, second home and even investment properties.

Who should skip it: Borrowers who don't have the minimum credit score requirements or need payment assistance.

2. FHA loan

What it is: An FHA loan is backed by the Federal Housing Administration, which provides mortgage insurance to lenders who provide FHA loans. It's the largest mortgage insurer in the world. Loans are administered by FHA-approved lenders. This can be local banks, credit unions and online lenders. Loans come in 15- and 30-year terms.

What you need: To secure a 3.5% down payment rate, your credit score will need to be 580 or above. If it's below 580, you can still qualify, but you'll need at least a 10% down payment. For down payments of less than 20%, your loan will require private mortgage insurance. PMI protects the lender just in case you default on your loan. PMI will get removed from your mortgage payments once you have at least 20% equity in your home.

Who it's good for: Borrowers who don't have strong enough credit to qualify for a conventional loan. FHA loans also offer down payment loans and grants through federal, state and local programs whereas conventional loans don't.

Who should skip it: If you have good or excellent credit that would qualify you for a conventional loan.

Check out our full guide to FHA loans.

3. VA loan

What it is: VA loans are offered through the US Department of Veterans Affairs. Military veterans, those in active duty or in the reserves qualify for VA loans. 

What you need: There's no down payment or minimum credit score requirement to get a VA loan.

Who it's good for: Those who serve or have served in the military.

Who should skip it: Borrowers who aren't in the military, obviously. VA loans are only good on primary residences so if you need funding for a second home or investment property, you'll need to look at other options.

Check out our full guide to VA loans.

4. USDA loans

What it is: USDA loans are funded by the US Department of Agriculture. They're available in specific regions across the country. They're made for borrowers in mostly rural areas who might not otherwise qualify for a traditional loan. Loans are backed by USDA-approved lenders (similar to FHA-backed loans). You can check to see if you'd qualify by checking the eligibility site.

What you need: There's no down payment required for a USDA loan. Most lenders require at least a fair credit score.

Who it's good for: Families in rural areas as long as you meet income and location limits.

Who should skip it: Those who don't meet the location and income requirements. If you qualify for one and not the other, you also might want to look into alternative loan options.

Check out our full guide to USDA loans.

Other loan types to know about

As well as being based on a government (or nongovernment) program, mortgages can be categorized by interest rates and how much the home price is. Those are:

• Fixed-rate loans: These are the most common type of loan within a conventional mortgage. Fixed-rate loans means you'll pay the same interest rate every month for the life of the loan. The only time your interest rate will change is if you refinance your mortgage.

• Adjustable-rate mortgages: ARMs have a fixed interest rate for a set amount of time and then the interest rate fluctuates periodically. They usually start out lower than standard fixed-rate mortgages but can change over time based on a benchmark. A 5/1 ARM means the first five years have a fixed rate and then a variable interest rate that changes every year after that.

• Jumbo loans: This is a mortgage that finances a property that's too expensive for a traditional loan. The qualifications for jumbo loans tend to be more strict. For most lenders, you'll need a credit score of at least 700 and usually a 20% down payment. Jumbo loans start where conforming loans end, which is different depending on where you are. Jumbo loans can have fixed or adjustable rates. 

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Are We in a Recession? Here's What You Should Know About Layoffs, Debt and Investing

Are We in a Recession? Here's What You Should Know About Layoffs, Debt and Investing

This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.

What's happening

Based on the latest numbers, the US is in a period of decline -- possibly even a recession.

Why it matters

Recessions are historically marked by a period of widespread layoffs, bankruptcies, higher borrowing costs and turbulence in the stock market.

What's next

Gather facts to protect your financial position. No one can predict the future, and it's important to move calmly and deliberately.

A recession is top of mind for many Americans. But how do we know if we're in one? Technically, the country is in a recession when gross domestic product, the value of all goods and services produced during a specific period, falls during two quarters back to back. Last week's results proved this was the case: GDP dropped by 1.6% in Q1 and 0.9% in Q2, according to the advanced estimate by the Bureau of Economic Analysis.

While all signs point to a recession, in the US, this is determined by the National Bureau of Economic Research -- and it has not called a recession yet. 

But whether we can call this period a recession or not feels like a game of semantics. 

Ultimately, everyday Americans are struggling as prices continue to soar, the cost of borrowing rises and layoffs increase across the country. Here are some recent questions I answered for my So Money podcast audience about how best to prepare, save, invest and make smart money moves in these uncertain times. 

What can we expect in a recession?

It's always helpful to go back and review recession outcomes so that we can manage our expectations. While every recession varies in terms of length, severity and consequences, we tend to see more layoffs and an uptick in unemployment during economic downturns. Accessing the market for credit may also become harder and banks could be slower to lend, because they're worried about default rates. 

Read more: The Economy Is Scary. Here's What History Tells Us 

As the Federal Reserve continues to raise rates to try to clamp down on inflation, we'll see an even greater increase in borrowing costs -- for mortgages, car loans and business loans, for example. So, even if you qualify for a loan or credit card, the interest rate will be higher than it was in the prior year, making it harder for households to borrow or pay off debt. We're already seeing this in the housing market, where the average rate on a 30-year fixed mortgage was recently approaching nearly 6%, the highest level since 2009. 

During recessions, as rates go up and inflation cools, prices on goods and services fall and our personal savings rates could increase, but that all depends on the labor market and wages. We may also see an uptick in entrepreneurship, as we saw in 2009 with the Great Recession, as the newly unemployed often seek ways to turn a small business idea into reality.

Will layoffs become more common?

With the unemployment rate sitting at 3.6%, the job market may appear to be, at least right now, the only stable part of the economy. But that's likely to be temporary, as companies battling with the current financial headwinds -- including inflation, rising interest rates and weakening consumer demand -- have already begun to announce layoffs. According to Layoffs.fyi, a website that tracks job losses at tech startups, there were close to 37,000 layoffs from startups in the second quarter of 2022. This week, Shopify announced reducing its workforce by about 10% or roughly 1,000 layoffs. CEO Tobi Lutke said the e-commerce company's pandemic-driven growth plans "didn't pay off."

In the Great Recession, unemployment peaked at 10%, and it took an average of eight to nine months for those out of work to secure a new job. So now could be the time to review your emergency fund if you think there's a shortfall. If you won't be able to cover a minimum of six to nine months' worth of expenses, which is hard for most people, see if you can accelerate savings by cutting back on spending or generating extra money. It's also a good time to make sure your resume is up to date and to establish contact with influential individuals in your professional and personal network. If you are laid off, make sure to apply for unemployment benefits right away and secure your health insurance. 

If you're self-employed and worried about a possible downturn in your industry or a loss of clients, explore new revenue streams. Aim to bulk up your cash reserves as well. Again, if previous recessions taught us anything, it's that having cash unlocks choices and leads to more control in a challenging time.

Will interest rates on my loans and debts go up?

As the Federal Reserve continues to raise interest rates to try to curb inflation, adjustable interest rates are set to increase -- ratcheting up the APRs of credit cards and loans, and making monthly payments more expensive. Ask your lenders and card issuers about low-interest credit options. See if you can refinance or consolidate debts to a single fixed-rate loan.

In past recessions, some financial institutions were hesitant to lend as often as they did in "normal" times. This can be troubling if your business relies on credit to expand, or if you need a mortgage to buy a house. It's time to pay close attention to your credit score, which is a huge factor in a bank's decision. The higher your score, the better your chances of qualifying and getting the best rates. 

Should I stop investing in my 401(k)?

With stocks in a downward spiral, many want to know how a recession could impact their long-term investments. Should you stop investing? The short answer is no. At least, not if you can help it. Avoid panicking and cashing out just because you can't stomach the volatility or watch the down arrows during a bear market. 

My advice is to avoid making knee-jerk reactions. This may be a good time to review your investments to be sure that you're well-diversified. If you suddenly experience a change in your appetite for risk for whatever reason, talk it through with a financial expert to determine if your portfolio needs adjusting. Some online robo-advisor platforms offer client services and can provide guidance. 

Historically, it pays to stick with the market. Investors who cashed out their 401(k)s in the Great Recession missed out on a rebound. Despite the recent downtick, the S&P 500 has risen nearly 150% since its lows of 2009, adjusted for inflation.

The one caveat is if you desperately need the money you have in the stock market to pay for an emergency expense like a medical bill, and there's no other way to afford it. In that case, you may want to look into 401(k) loan options. If you decide to borrow against your retirement account, commit to paying it back as soon as possible.

Should I wait to buy a home?

With mortgage rates on the rise and housing prices not cooling nearly fast enough, owning could be more expensive than renting right now. A report from the John Burns Real Estate Consulting firm looked at the cost to own versus renting across the US in April and found that owning costs $839 a month more than renting. That's nearly $200 greater than at any point since the year 2000.

Fixed rates on 30-year mortgages have practically doubled since last spring, which has helped slow down offers and cool housing prices -- but competition among buyers is still stiff due to historically low inventory. All-cash offers and bidding wars continue in plenty of markets. If you've been shopping for a home in recent months or the past year to no avail, you may feel exhausted and defeated.

As I stated in my newsletter: Don't be hard on yourself. You're not doing anything wrong if you have yet to offer the top bid. While it's true that a fixed-rate mortgage can offer you more predictability and budget stability, as long as inflation continues to outpace wages, there could be some bright sides to renting right now. For one, you're not buying a home in a bubble market that some economists are saying is soon to burst. If you have to unload the home in a year or two -- during a possible recession -- you may risk selling at a loss.

Secondly, renting allows you to hold onto the cash you would have spent on a down payment and closing costs, and will help you stay more liquid during a time of great uncertainty. This allows you to pivot more quickly and secure your finances in a downturn. Remember: Cash is power.

Read more: Should You Buy a Home in 2022 or Wait? 3 Factors to Consider

My final note is that it's important to remember that recessions are a normal part of the economic cycle. Long-term financial plans will always experience some declining periods. Since World War II, the US has had about a dozen recessions and they typically end after a year or sooner. By contrast (and to give you some better news), periods of expansion and growth are more frequent and longer lasting. 

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