If you’re looking to finance a new or used vehicle, understanding your options is key. But there are so many different sources of information out there, and so many lenders to choose from.
This comprehensive guide will introduce you to the top auto loan companies in the United States, and provide essential tips to help you find the best deal for your needs.
Top Auto Loan Companies in the U.S.
There are a lot of lenders to choose from, and it’s not always clear which one will provide the lowest interest rate until you’ve applied. Different lenders have their own methods for assessing applicants. Your loan offer is generally based on factors like your credit score, the size of your down payment, the type of vehicle you’re looking to finance and the length of the repayment term.
According to Auto Dealer Today, some of the top U.S. auto loan companies are:
New Vehicle Lenders
| Rank | Lender | Market Share |
| #1 | Toyota | 11.92% |
| #2 | General Motors | 7% |
| #3 (tie) | American Honda Finance Corp. | 5.13% |
| #3 (tie) | Ford Motor Credit Co. | 5.13% |
| #5 | Chase Auto | 4.77% |
Used Vehicle Lenders
| Rank | Lender |
| #1 | Capital One Auto Finance |
| #2 | Ally Financial |
| #3 | Westlake Financial Services |
| #4 | Santander Consumer Finance |
These lenders may offer a range of loan options, from new car loans to auto refinances, catering to various credit profiles and needs.
How to Choose the Best Auto Lender for You
Assess your credit score. Your credit report significantly influences the interest rates you’re eligible for. Higher scores generally secure lower rates. If you have a lower score, you might want to look for lenders specializing in bad credit loans.
Determine your budget. Understand how much you can afford in monthly payments. This will help you decide the loan amount and terms that fit your financial situation.
Compare different lenders. Research various lenders, including banks, credit unions, online lenders and dealerships. Each has its pros and cons, and the best choice depends on your specific needs and credit profile.
Look for preapproval options. Preapproval can give you a clear idea of the loan amount and rates you qualify for without impacting your credit score significantly. This step also gives you better negotiating power at the dealership.
Consider the loan terms. Apart from the interest rates, look at the loan term, down payment requirements and any potential prepayment penalties. A lower interest rate over a longer term might end up costing more than a higher rate over a shorter term.
Types of Auto Loans
A 2023 Experian report breaks down the year’s top auto loan sources and their market shares of new financing. The most common type was manufacturer-financed, but this may not be the right option for every borrower. Different sources of financing have different benefits. Make sure to do your research to find the right fit for your needs.
- Bank loans – 22.21%
- Credit unions – 13.18%
- Captive (manufacturer-financed) – 59.18%
- Finance companies – 4.72%
- “Buy Here Pay Here” (dealer-financed)/others – 0.72%
Bank Loans & Credit Unions
Regional and national banks issue their fair share of auto loans due to the sheer number of customers they have. Banks like Bank of America and Capital One offer competitive rates and benefits, like rate discounts and online loan calculators. They’re ideal for borrowers with good to excellent credit.
Credit unions like PenFed and Federal Credit Union often provide lower interest rates and personalized service, making them a great choice for members with various credit histories.
Getting pre-approval from a bank or credit union before visiting a dealership is especially helpful when you negotiate a car loan. Walking in with approved car financing can significantly strengthen your position as a buyer.
Captive (Manufacturer-Financed)
This type of auto financing is offered by car manufacturers, such as Toyota or Ford. These brands usually offer attractive promotions for new vehicles, such as 0% APR (annual percentage rate) to customers who meet their credit score requirements.
Finance Companies
Many finance companies, including online lenders, offer car loans. They cater to customers with different credit backgrounds, potentially offering competitive rates and flexible terms for their individual needs.
“Buy Here Pay Here” (Dealer-Financed)
Ideal for those with poor credit, car dealerships can finance your car loan by submitting your loan application to multiple lenders to find the best rates. However, these loans may come with higher interest rates.
How To Get the Best Auto Loan Rate
Apply at one time. When you apply for an auto loan, it might result in a hard credit pull, which can briefly lower your credit scores. However, both VantageScore® and FICO® credit scoring models treat multiple hard inquiries for auto loans as a single inquiry if they occur within a specific timeframe (45 days for FICO® and 14 days for VantageScore). In other words, it’s a good idea to complete all your loan applications within a two-week period. This strategy can help you get the best loan offer without hurting your credit score.
Shop around. The key to getting the best car loan is to shop around to find the lowest rates. Compare offers from multiple lenders, including online lenders and financial institutions. Many of these auto lenders post their interest rates online, though a quick phone call to a local branch may uncover special offers not posted on their websites.
Consider a co-signer. A co-signer with good credit could help you secure better rates. However, remember that your co-signer will also be held responsible for missed loan payments. This will cause their credit score — and yours — some damage.
Look for discounts. Some lenders offer rate discounts for autopay or existing customers. Plus, loan terms and interest rates can be negotiable.
Plan ahead. Car shoppers should already have their car loan lined up before they step foot in any dealership. That pre-approval can be a powerful tool for leveraging lower sale prices and better dealership financing terms.
What Is the Best Auto Loan for Bad Credit?
Banks and credit unions. If you maintain a positive relationship and good standing with your bank or credit union, they might be more inclined to assist you. Although traditional lenders like these often have stricter criteria and require higher minimum credit scores, exploring their offers could be helpful.
Online lenders. There are many online platforms where you can find lenders willing to work with borrowers who have bad credit. Often referred to as “subprime” or “second chance” loans, these options typically come with higher interest rates, but they also tend to have higher approval rates.
Car dealerships. Certain dealerships offer their own financing departments that specialize in assisting car buyers with bad credit. These in-house financing options may offer more lenient loan terms for individuals with lower credit scores, but it’s important to note that they might also come with higher interest rates.
Online car sellers. Many online car-buying platforms such as Carvana offer financing options, catering to buyers with bad credit. These services allow you to prequalify for financing before you start exploring their range of vehicles.
How Do Auto Loans Work?
Auto loans are a way to finance the purchase of a vehicle, whether new or used, from a dealership or a private party. The application process typically involves a credit check, where lenders evaluate factors like your credit score, debt-to-income ratio and possibly past bankruptcies. This assessment helps determine your loan approval, the car loan rates, and the terms of the loan, including the life of the loan and any prepayment penalties.
Generally, lenders require a minimum credit score and may adjust loan interest rates based on your creditworthiness. Car payments are made over the term of the loan, with options for longer loans usually resulting in lower monthly payments but potentially higher overall interest costs.
In some cases, borrowers might choose refinancing, which involves taking out a new loan to replace the existing one. This refinance loan can offer lower rates or better terms, helping reduce monthly car payments or adjust the length of the loan. For those who initially leased a vehicle, a lease buyout option can be financed through a used car loan.
The Bottom Line
Finding the best auto loan company requires research and understanding your financial situation. Consider your credit score, loan types and the lenders’ offerings. Use tools like loan calculators, look into prequalification options, and don’t overlook smaller lenders and credit unions for potentially better rates. Finally, entering a dealership with pre-approval gives you a leg-up when negotiating an auto loan.
