Best Auto Loans for 2021

If you are in the market to buy a new car, one way to pay for it is with an auto loan. Not only should you look for a fair price on a new or used car, but you should also look for a good interest rate on your auto loan.

Increased competition from online and non-traditional auto lenders has made it easier to get approved for an affordable auto loan. With so many options on the market today, consumers need to shop around and compare offers from more than one lender to find the best deal.

To help you get started on your search, check out our picks for the best auto loans from online lenders; best traditional auto loans; and best credit union auto loans.

In this guide:

• Best Online Auto Loans
• Best Traditional Auto Loans
• What to Look for in an Auto Loan
• How to Get the Best Auto Loan Rates

Best Online Auto Loans for 2021

1. LightStream
2. CarsDirect
3. AutoPay
4. Ally

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1) LightStream

As a division of SunTrust Bank, LightStream is a reputable lender offering auto financing to qualified borrowers. LightStream auto loans do not require a minimum annual income but there are other credit criteria borrowers must meet, such as average to good credit. Here are some of the key things you need to know if you’re considering a loan from LightStream:

• Minimum credit score: 660
• Rate discount: 0.50% for automatic payments
• Origination fee: None

>> Learn more about LightStream’s Auto Loans on its website.

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2) CarsDirect

Note: CarsDirect isn’t a lender itself but connects consumers with lenders after they fill out a simple application

CarsDirect doesn’t impose any minimum credit score requirement, so it may be a good option for drivers seeking a bad credit auto loan. Of course, you’ll qualify for better rates if you can have a strong credit history, and there are other requirements borrowers must meet, including a minimum income requirement.

Here’s what you need to know about CarsDirect loans:

• Minimum credit score: None since it is a marketplace
• Rate discount: Varies by lender
• Origination fee: Varies by lender

>> Learn more about CarsDirect’s Auto Loans on its website.

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3) AutoPay

AutoPay is a newer addition to the online auto financing market. The finance company offers an array of car loans for borrowers with a range of income and credit qualifications. AutoPay auto loans come with the following terms:

• Minimum credit score: 600
• Minimum annual income: $24,000
• Rate discount: 0.50% for automatic payments
• Origination fee: Not disclosed

>> Learn more about AutoPay’s Auto Loans on its website.

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4) Ally

Ally is an online bank that offers a wide array of financial products including auto loans. You can use an Ally auto loan to buy a vehicle, or you can lease a vehicle with Ally SmartLease® if you’re interested in driving a new car more frequently. Both personal and business vehicles can be financed with Ally, but you need to meet certain qualifications. Here’s what you need to know about terms and conditions:

• Minimum credit score: 620
• Rate discount: Not disclosed
• Origination fee: Not disclosed

>> Learn more about Ally’s Auto Loans on its website.

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Best Traditional Auto Loans

1. Wells Fargo
2. Capital One
3. U.S. Bank

1) Wells Fargo

Wells Fargo is a global financial institution that offers affordable car loans to qualified borrowers. There is no minimum income requirement, but there are other credit criteria borrowers must meet to be eligible. Here’s what you need to know if you’re considering a Wells Fargo auto loan:

• Minimum credit score: 650
• Rate discount: Not disclosed
• Origination fee: Not disclosed

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2) Capital One

Capital One is a major auto lender, and it makes the loan approval process easy. You can pre-qualify for financing online without a hard credit inquiry, and you’ll have flexibility in your loan repayment terms.

Unfortunately, you can only borrow if you buy from a participating dealership, so you are restricted in where your vehicle can come from. However, Capital One has more than 12,000 participating dealers it works with, so most borrowers should be able to find a suitable vehicle at a participating dealership.

• Minimum credit score: Not disclosed
• Rate discount: Not disclosed
• Origination fee: Not disclosed

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3) U.S. Bank

U.S. Bank was first founded in 1863 and it now offers auto loans in 49 out of 50 states across the United States. It offers a competitive APR, flexibility in loan terms, and it makes loans available even to borrowers without perfect credit.

• Minimum credit score: 650
• Rate discount: Not disclosed
• Origination fee: Not disclosed

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How We Chose the Best Auto Loans

To find the best auto loans, our Editorial Team analyzed the product’s APR, loan terms, BBB rating, minimum and maximum borrowing limits, states available, application/origination fees, and discounts. The weight of each of these varied depending on whether the product was offered from a traditional bank and online lender.

Learn more about our ratings and methodology here.

What to Look for in an Auto Loan

Before applying for an auto loan, it is important to know what you should pay attention to when selecting the right lender for your auto financing needs.

First and foremost, be cognizant of the interest rate offered by your lender of choice. The interest rate dictates how much you will pay over the life of the loan in addition to the original amount financed. A higher interest rate means you pay more for your auto loan.

In addition to the interest rate, you should also look at qualification requirements, including minimum income, minimum credit score, and vehicle requirements.

Borrowers should also review the strength of the financial institution offering auto financing, along with the term length of the loan and payment options. Each of these factors plays a role in how well the car loan used to purchase a new or used vehicle fits into your financial life.

How to Get the Best Auto Loan Rates

There are several steps you can take to ensure you get the right car loan with the best rate for your next vehicle purchase.

• Shop the loan, then the car. Obtain financing or a pre-approval from an auto lender before heading to the dealership so you can focus on negotiating on the vehicle purchase itself.
• Know your credit. Your credit history and score will dictate how much you pay in interest over the life of your auto loan. Check your credit report beforehand to make sure you are in the best financial position to get an affordable car loan.
• Look for an interest rate discount. Some financial institutions offer interest rate discounts on auto loans. These may be available for having a qualified account or establishing automatic payments once the loan is approved.
• Select a shorter loan term. Shorter repayment terms may help you save on the total interest paid over the life of the loan, and it may allow for a lower interest rate offered. However, a shorter repayment term also means a higher monthly payment, so be sure to check your budget first.
• Avoid variable auto loan rates. Some lenders may offer a variable interest rate loan, in which the interest rate changes over time as broad interest rates move up or down. A fixed interest rate loan may be a better option if you want predictability with your payments and the total cost of borrowing.
• Consider a down payment. Putting down a few hundred to several thousand dollars when purchasing a car can help reduce the total amount you finance and pay interest on.
• Check out dealer financing. Some dealerships will offer exclusive financing offers on certain vehicles. This can provide a much lower interest rate than some banks or credit unions offer, but be sure to compare the rates you’re offered with a few other options to make sure the deal you’re getting is as good as it seems.
• Work with select dealerships. Some auto dealers have preferred relationships with specific lenders. This can make it easier to qualify for a new auto loan with an affordable rate.

Bottom Line: Find the Auto Loan That’s Best for You

There are car loan options for borrowers with just about any credit history, income, and vehicle financing needs. However, finding the right one can be a challenge if you don’t know where to start. Be sure to shop around and consider all of your auto loan options before making your decision.

Additional auto loan resources:

• Best bad credit auto loans
• Credit union auto loans
• Classic car loans
• Best RV loans
• Best motorcycle loans

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^*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. 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 5.95% APR with a term of three years would result in 36 monthly payments of $303.99.