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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Best Car Loans With Excellent Credit