Banks
Competitive rates for good credit, especially if you already bank there.
Finance your car without overpaying.
An auto loan is secured by the vehicle you buy. The rate, the term and what gets added at the dealership decide what you really pay. Here is how to keep each one in check.
- Get preapproved first. A rate in hand gives you a benchmark at the dealer.
- Shorter is cheaper. Long terms lower the payment but raise total interest.
- Price before payment. Negotiate the car price before talking monthly payments.
Written by the Lendli Editorial Team under our editorial policy. Last reviewed .
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$3,550Extra interest: 84 vs. 48 months on $30,000
36–84 moCommon auto loan terms
SecuredThe car is the collateral
How the term changes what you pay
On a $30,000 loan at 7% APR, stretching the term from 48 to 84 months lowers the payment by about $266 a month, but adds about $3,550 in interest.
$30,000 at 7% APR
- 48 months: $718.39 a month, $4,482.59 interest
- 60 months: $594.04 a month, $5,642.16 interest
- 72 months: $511.47 a month, $6,825.85 interest
- 84 months: $452.78 a month, $8,033.55 interest
Long terms also raise the risk of negative equity, owing more than the car is worth, because cars lose value fastest in the first few years.
Where to get an auto loan
Where you borrow affects your rate. Shopping two or three sources usually pays off.
Credit unions
Often among the lowest rates; federal credit unions cap most APRs at 18%.
Online lenders
Fast preapproval online, useful for comparing offers.
Dealer financing
Convenient, and manufacturer promotions can be very low. Compare against your preapproval.
Private-party purchases
Some lenders finance cars bought from individuals; fewer options, so compare carefully.
Refinancing
If rates drop or your credit improves, a new loan can lower your rate.
Loan payment calculator
Estimated monthly payment
$336.89
Principal $10,000
Total interest $2,128
Total repaid $12,128
Estimates only, for fixed-rate installment loans with payments made on time. Your actual rate, fees and payment depend on the lender's review of your credit and income.
Estimate your car payment
The calculator is set to $30,000 at 7% APR over 60 months. Enter the amount you will finance after your down payment and trade-in.
Amount financed = price + taxes and fees − down payment − trade-in
Add-ons such as service contracts and GAP coverage increase the amount financed if they are rolled into the loan, so include them when you calculate.
Rates depend heavily on your credit score and whether the car is new or used; used-car loans often cost more.
Common add-ons: what they are
Add-ons are usually optional. Know what each one does before it lands on your contract.
| Add-on | What it covers | Good to know |
|---|---|---|
| GAP coverage | The difference between your loan balance and the car's value if it is totaled or stolen | Most useful with a small down payment or long term; can often be bought outside the dealer |
| Extended warranty / service contract | Certain repairs after the factory warranty | Optional; compare coverage and price, and it can be negotiated |
| Credit insurance | Loan payments if you die or become disabled | Optional; you cannot be required to buy it to get the loan |
| Paint and fabric protection | Coatings and treatments | Often high-margin; optional |
Get preapproved before you shop
A preapproval tells you what you can borrow and at what rate, so the dealer has to beat it.
Check your credit
Pull your reports and know your score range.
Set your budget
Decide on a total price and payment you can afford.
Get 2–3 preapprovals
Banks, credit unions or online lenders.
Negotiate price first
Agree on the car's price before discussing financing.
Rate shopping and your credit
Common credit scoring models treat multiple auto loan inquiries made within a short shopping window as a single inquiry, so comparing several lenders in the same couple of weeks has little extra impact.
Pros and cons of auto loans
Financing lets you spread the cost, but it is easy to overpay without a plan.
Pros
- Lower rates than unsecured loansThe car secures the loan.
- Spread the costPay over several years.
- Can build creditOn-time payments add positive history.
- Promotional dealsManufacturers sometimes offer very low APRs on new cars.
Cons
- Repossession riskMissed payments can cost you the car.
- Negative equityOwing more than the car is worth, especially on long terms.
- Dealer markupArranged rates can be higher than what you qualify for.
- Add-on creepOptional products raise the amount financed.
At the dealership
Five moves that keep the deal honest.
Bring your preapproval
It sets the rate to beat.
Negotiate the price
Settle the out-the-door price first.
Value your trade-in separately
Get outside offers before the dealer's.
Question every add-on
Say no to anything you do not want.
Read before you drive
Make sure financing is final and the numbers match.
Traps to avoid
Three situations the CFPB and FTC warn car buyers about.
Rolling negative equity
Adding what you still owe on your old car to the new loan makes the new loan bigger than the car is worth.
Payment-only selling
Focusing on the monthly payment can hide a longer term and a higher total cost.
Yo-yo financing
Be cautious about driving off before financing is final; the dealer may call you back for new terms.
Auto loan questions, answered
What car buyers ask most before they finance.
What is a good APR for a car loan?
It depends on your credit score, whether the car is new or used, the term, and market rates at the time. Get several quotes and compare APR.
How long should a car loan be?
Choose the shortest term with a payment you can afford. Longer terms cost more in interest and raise the risk of owing more than the car is worth.
Can I get an auto loan with bad credit?
Often yes, but at higher rates. A larger down payment, a co-signer or a less expensive car can help.
Should I use a personal loan to buy a car?
An auto loan usually costs less because it is secured. A personal loan might suit an older or private-sale car that auto lenders will not finance.
How much should I put down on a car?
A larger down payment lowers the payment and total interest and reduces the chance of negative equity. Choose an amount that still leaves you an emergency fund.
Get your financing in place first
Check your loan options in a few minutes, then walk into the dealer with a rate to beat.