Frequently Asked Questions about How to Compare Auto Loans

Here are the answers to the most commonly asked questions about comparing auto loans.

What lenders should I consider when I compare auto loans?

If you would like to find the most competitive rates, online lenders are typically the best place to start. The high level of competition on the Internet drives down auto loan rates. If nothing else, you can use the rates you find online to get a better idea of how competitive traditional lenders' offers are. You might also consider your bank or credit union, manufacturer financing, or dealership financing.

How do I compare auto loans?

Using our site, you can compare auto loans by signing up for free quotes from our lending partners. You can receive up to five free offers on auto loans at once. As soon as you have your quotes, you can compare the various loans to determine which is right for your needs.

If I have less-than-perfect credit, what's the best way to finance a vehicle?

Our lending partners have experience working with borrowers with credit challenges and can usually work out some type of financing agreement. You may have to pay slightly higher rates because of your credit risk, but you can still probably get a loan. If you have serious credit issues, you might try dealership financing. Although you will get gouged with a sky-high interest rate, most dealers will lend to buyers with poor credit.

If I don't get a loan from the dealer, how does payment work?

If you decide to secure a loan from a third-party lender rather than the dealer, most lenders will write you or the dealer a check for the amount of the vehicle. You then essentially pay for the car in cash, or by writing a check to the dealership. Dealers always welcome buyers who can pay in cash because it expedites and simplifies the transaction.

I have subprime credit. What are my car financing options?

It's especially critical for borrowers with credit challenges to compare auto loans. The more you shop around, the more likely you will find a decent rate. Remember that you will not qualify for the lowest interest rates, and you may have to make a larger down payment. If you have trouble finding a reasonable loan, you might try waiting a year to buy your car. During this time, you can save for a large down payment, which will lower your interest rates. In addition, you can take the year to focus on improving your credit score by paying down debts and continuing to pay on time.

Do I really need a 20% down payment?

The answer to this question varies. If you want your interest rates and payments as low as possible, then a 20% down payment is a wise move. However, as long as you have a strong credit history, you don't necessarily need a 20% down payment to qualify for a loan. When you make a down payment of less than 20%, you will face more costly interest expenses and you risk having negative equity in the vehicle. Negative equity is a risky situation in which the outstanding balance of your auto loan exceeds the worth of the vehicle.

How do the interest rates of loans for new cars compare to those for used cars?

In most cases, the rates on loans for new vehicles are lower. The new-car loan market is highly competitive, so lenders tend to offer better rates in order to keep pace with their rivals. Though used-car loans have slightly higher rates, you have to keep in mind that you will save on the purchase price of the vehicle by buying used. The savings on the sale price may exceed the costs of the higher interest rate.

Now if you are ready to compare auto loans, be sure to go by the five rules of car buying.