Where to Compare Auto Loans

Consumers have several sources to consider when shopping for auto loans. Learn where to compare auto loans to get the best rates.

Banks

Banks usually have the most experience in offering auto loans, as they have been doing so basically since the invention of cars. Typically, when you compare auto loans from traditional banks, you will find conservative lending policies geared toward people with above-average credit. Out of all the sources for auto loans, banks offer some of the most competitive rates. Bank-issued auto loans are also convenient because most consumers have already established a relationship with a bank through a checking or savings account. Most major banks have websites that allow you to compare rates and apply for auto loans, but you can also drop by a branch office to speak to a loan specialist in person if you have further questions.

Credit Unions

Credit unions are virtually identical to banks, but they usually only lend money to members. Furthermore, credit unions are non-profit organizations, which minimizes their operating expenses and allows them to offer lower auto loan rates. However, not every car buyer can take advantage of credit union auto loans because they may not belong to one.

Manufacturer Financing

When you compare auto loans, you may run across promotions from manufacturers for low-interest financing. Almost all major car manufacturers operate their own financing division, such as Chrysler Financial or GMAC. Manufacturer finance companies function much like retailers, in that they borrow loans at wholesale costs, add their mark-up, and then lend the money at higher rates. Manufacturer financing tends to have less stringent policies than banks, but they compensate for their flexibility with higher interest rates.

Dealerships

Car buyers who don't bother to compare auto loan rates tend to go with dealership financing. Dealers will lend to just about anybody because they make obscene profits doing so. The biggest appeal of dealer financing is the one-stop simplicity; buyers only have to pick a car, sign a few papers, and they're on their way. However, dealer rates are often the highest of all forms of auto financing.

Online Financing

The Internet is a great place to compare auto loans because so many lenders have to compete for your business at once. You can get several quotes at the same time to simplify the shopping process. The down side to online financing is that you have to provide your personal information and may get bombarded with lender offers. If you want to speak to a lender and look smart, be sure to use some of the terms we have given in the glossary.