Best Used Auto Loan Rates: Drive Away with Savings

Best Used Auto Loan Rates: Drive Away with Savings

Used auto loan rates are the rates that financial institutions charge when providing financing for the purchase of pre-owned vehicles. Banks, credit unions, online lenders, and even car dealerships fund people who need money to purchase a vehicle.

The associated rates are the cost of borrowing money from the institution to purchase the used car. Therefore, the best used auto car loan rates play a crucial role in determining how much you will pay over the life of the loan, plus the affordability of every-month payments.

Considering how much a loan rate can affect the overall cost of the car, vehicle buyers should ensure they get the best loan rates.

Best Auto Loan Rates

Buyers should research different lenders with or without a good credit score to ensure their loan rates align with their financial capabilities.

So, how can you find the best auto loan lenders with affordable loan rates for the vehicle you want? The information below is a detailed guide to securing a used car’s best auto loan rates.

Importance of Finding the Best Auto Loan Rates

Best Auto Loan Rates

If you want to purchase a used car, it is important to find the best car loan rates for the following reasons:

Cost Savings

Securing low-interest rates for a used car loan goes a long way in saving you costs. Low interest means paying less throughout the term of the loan. It reduces the overall cost. Therefore, your vehicle purchase will be affordable.

Affordable Monthly Payment

Lower interest rates can be useful in making affordable monthly payments. People with limited funds can still access car loans, but having great interest rates helps ease the monthly budget. Low interest makes it easier to meet incisional obligations without straining yourself.

Better Credit Score

Obtaining a car loan with poor credit can be challenging. However, it is not impossible. If you get favorable loan rates, the repayment process will be easy since the payments will be affordable.

However, you must ensure that the lending institution reports to the major credit bureaus so that on-time payments eventually improve your credit score.

It will help you secure credit for other purposes in the future.

Increased Vehicle Options

Favorable interest rates can broaden your vehicle options. You will be free to choose a higher-quality and more reliable used car.

If you work with the right financial institutions, you can access an inventory of certified preowned cars with more favorable warranties and good performance.

Long-term Financial Health

A well-managed used auto loan with favorable rates can contribute to the buyer’s overall financial health.

If you can manage the payments well, you won’t face the consequences of late or missed payments. It will help maintain your credit score, making it easier to secure favorable loan rates in the future.

Less Financial Risk

High-interest auto loans can increase the risk of default, which could lead to repossession. Therefore, finding the best rates for used car loans ensures you are better positioned to meet your financial obligations, avoiding potential financial setbacks.

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Factors that Affect Used Car Loan Rates

Used Car Loan Rates

Several factors affect auto loan interest rates. Lenders often consider these factors when determining the risk associated with lending you money, and thus, ultimately influences the interest rate they offer. Some of the major factors include:

Credit Score

Most car buyers know that a credit score significantly impacts the eligibility for a car loan. But it can also affect the interest rate. Your credit score tells your lender how risky it is to lend you money.

So, most lenders run a credit check to evaluate creditworthiness. Financial institutions have a minimum credit score requirement, usually a score of at least 700. However, it does not mean the lender will deny your application if it is below. But it may affect the interest rates.

If you have a high credit score, lenders may be willing to give lower interest rates than people with low credit scores. In addition, people with high scores can better negotiate for low interest rates.

So, people with no or poor credit often have to deal with high auto loan rates.

Steps to Improve Credit Score

If you want lower auto loan interest rates through excellent credit, you can postpone your purchase and instead work on improving your credit score. The following are ways to build a good credit history:

Review your credit report.

Before doing anything, ensure you know what could work in your favor or is affecting your score. Pull a copy of your credit report and review it for mistakes or the factors affecting it.

Handle your payments as often as possible.

The key to good credit is on-time payments. Your payment history is likely hurting your credit history. So start making payments and clearing debts.

Begin with the small bills and work your way to larger payment requirements. Set alarms to remind you of when bills are due. In addition, set up automatic payments from your bank account.

Never go past 30% of credit utilization.

Credit utilization is the amount that you use at any given time. You should keep credit utilization in check by paying credit card balances in full every month. If you fail, the working rule is to keep your total outstanding balance at 30% or less of the total credit limit. From here, you can reduce it to 10% or less.

Consider consolidating debts.
Used Car Loan Rates

If you have many outstanding debts, consider taking out a debt consolidation loan from a credit union or bank and pay off all of them. With this, you will only have one payment to deal with. It can improve your credit utilization ratio and, thus, your credit score.

Limit new account applications.

It helps to open new accounts to build your credit file. However, you should limit how often you submit credit applications. Each application can trigger a hard inquiry, affecting your credit score. Multiple inquiries have a compounding effect.

Get a secured credit card.

This type of card requires a cash deposit upfront. The deposit is your credit limit, and once you obtain the card, you can use it like a regular credit card. On-time payments for this card help to build or improve your credit score.

Deal with collections accounts.

If you have a collections account, ensure that you pay it off to remove the threat of getting sued over the debt. Paying off can also help convince the collection agency to stop reporting the debt.

Become an authorized user.

And finally, you can be added to a relative or friend’s credit card account as an authorized user. This action adds the account to your credit reports, allowing you to benefit from a positive payment history.

Debt to Income Ratio

Used Car Loan Rates

Many lenders consider your debt-to-income ratio to determine the used car loan rate. The debt-to-income ratio indicates how much money you owe compared to your present income. This is why many lenders ask for proof of income.

When they take this factor into account, it helps determine creditworthiness. A high debt-to-income ratio means you owe a lot of money to the market, so your chances of repaying the amount are less.

On the other hand, if it is low, then it means you are in a better position to repay the car loan rate. Therefore, buyers who want better loan rates should maintain a low to moderate debt-to-income ratio.

Loan Term

The loan term or tenure is how long you must pay off the loan. Most loan terms range from 24 to 72 months. Some even extend to seven years.

While some people opt for longer loan terms, it is important to note that the longer the loan term, the more interest you will pay. Similarly, you should consider that most lenders charge higher interest rates for longer periods.

It is because the longer the term, the more the car’s value depreciates. You may owe more than the vehicle’s worth with a longer term. So lenders mitigate their risk by charging higher interest rates.

In addition, lenders receive their money faster with shorter loan terms. So, they offer better interest rates to encourage borrowers to take the short-term loan.

Down Payment or Trade-In

Making a good downpayment or trading in an old car can reduce your loan amount and offer favorable interest rates. If you place a downpayment or trade in your vehicle, it helps to convince the lenders that you are reliable with money so they can give you a better interest rate.

The more money you can put down or your trade-in is worth, the better your interest rates. But putting down any amount can improve your chances since it is better than nothing.

Car Model and Age

When a lender gives an auto loan, the vehicle becomes collateral. So, in case of default, the lender takes the car and may sell it to collect the unpaid loan amount. Therefore, lenders must consider the car model and age to determine the interest rate.

First, you should know that older cars have higher interest rates. It is because the vehicle is already depreciated. In addition, used vehicles often have shorter loan terms, so the dealership earns less. Increasing interest rates helps the dealer and lender.

The second thing to note is that popular car models have a higher resale rate than less popular models. So lenders mitigate their risk by offering higher interest rates on unpopular car loans.

Lender Policies

Different lenders have varying lending policies. Some have competitive auto loan rates for used cars, while others focus more on new vehicles. Therefore, the loan rates you receive could depend on your chosen lender.

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Where to Get Auto Loan Rate Information

Auto Loan Rates

When you research auto loans, you will encounter several types of lenders. These lenders can offer information on loan rates based on your credit score, car model and age, and other factors.

It is important to compare auto loan rates available based on the car you want and your financial situation. Here are the most common sources for auto loan rates:

Banks and Credit Unions

Traditional lenders such as banks and credit unions are good sources of auto loan rates. Most traditional lenders post auto loan rates for new and used cars on their websites.

Therefore, you can check out various financing options and rates, especially if you have a working relationship with them. Check out well-known credit unions such as Consumers Credit Union, Navy Federal Credit Union, and PenFed Credit Union.

Similarly, banks such as Capital One are among the few institutions offering auto loans for all people, even those with bad credit. Bank of America is another good option. If you cannot find any information on the websites, call the institutions and ask for a ballpark estimate.

Online Lenders

Numerous online lenders offer auto financing to people who need them quickly and conveniently. Online lenders are usually willing to work with all people, including those with bad or no credit.

Reputable lenders typically offer their rates through websites and social media platforms. In addition, some allow you to pre-qualify for a loan by providing basic information.

The primary advantage of Internet lenders is that there are many options, meaning you can access various auto loan interest rates. However, buyers must be careful when working with online lenders since not all businesses are legitimate.

Dealership Financing

Where to Get Auto Loan Rate Information

Some car dealerships additionally provide car loans for used cars in their inventory. This type of financing is usually available for everyone, regardless of credit score.

You can find information about interest rates online through the dealership’s website. In addition, when you visit the car dealership, they can provide information about their auto loan rates.

Automaker Financing

Some car manufacturers offer their own financing through their dealerships. Visiting the manufacturer’s dealership or checking the website can give you an estimate of loan rates based on the vehicle you want.

The benefit of working with automaker dealerships is that the vehicles are often of higher quality and have extended warranties.

Credit Score Monitoring Services

Some credit monitoring services provide tools and resources to help check your credit score and estimate the car loan interest rates you may qualify for based on your credit history.

It is also worth checking loan comparison websites, which let you compare auto loan rates from various lenders in one place. Such platforms help you find the most competitive rates available.

Factors to Consider When Choosing Car Loan Rates


The factors to consider when choosing auto loan rates are similar to those that affect the rates in the first place. Still, it is important to consider these factors since it is the key to driving away with a great deal. Below are some of the things to consider when picking auto loan rates:

Term Length

As discussed, shorter loan terms come with lower interest costs. However, it is also important to consider that you will have higher every-month payments.

On paper, it seems that the ideal choice is a short-term auto loan to keep overall interest costs low. However, you may not be in the best financial situation to keep up with higher payouts each month.

Therefore, consider a loan term to balance your budget while minimizing interest costs. So, if you have the finances, get a shorter loan term. But if you struggle to make payments, opt for a longer auto loan term.

Fixed vs. Variable Rates


A fixed-rate auto loan has a set interest rate for the whole life of the loan. Lenders determine the interest rates through risk-based pricing, meaning it depends on your credit score. The interest rate you qualify for is an APR or annual percentage rate. It is inclusive of the auto loan fees.

The primary allure of a fixed-rate auto loan is its predictability. The loan is ideal for long-term financing since the APR and payment never changes throughout the loan duration.

If the loan duration is long, you will have the peace of mind that the interest rate will never change, even with market changes. These types of auto loans are widely available from various lenders, including banks and credit unions.

However, it is important to note that fixed-rate auto loans can be costly when interest rates dip since you will miss out on savings. In addition, fixed interest rates present more risk to the lender, so they may compensate by charging a higher interest rate.

The alternative is a variable-rate auto loan. The car loan comes with an interest rate that may periodically change per the lender’s prime rate. The prime rate is what lenders use as a starting point when they determine interest rates on credit cards, loans, and other types of accounts.

The prime rate can change with market conditions. So, if the primary rate increases, it causes the auto loan’s interest rate to go up. It, in turn, causes a higher monthly payment amount.

The lender determines the initial interest rate by considering the market conditions, credit score, income-to-debt ratio, and the prime rate.

A variable-rate auto loan can be beneficial if it initially has a lower interest rate. If the loan is short-term, you can pay off the loan before the rates rise significantly. Therefore, it is the ideal setup for a short-term auto loan.

In addition, most of these loans have an interest rate cap, making it ideal if the ceiling rate is not too far above the fixed rate the lender offers.

On the other hand, these loans are unpredictable since they are subject to change. So you may pay more than you expect. Additionally, some lenders do not have a rate cap, meaning the interest rate would rise significantly. So, you may owe more on the auto loan than the car’s worth.

Choosing between a fixed and variable-rate car loan depends on your financial tolerance and the interest rate environment.

The fixed-rate auto loan is best if you prefer predictability and security. However, if you have room in your budget and prefer flexibility, consider the variable-rate car loan. If you make payments in excess, you could pay off the car loan before the interest rates change. But beware of any prepayment penalties.

Down Payment

Auto lenders may offer better interest rates for people willing to make a substantial down payment for the car.

Therefore, before choosing an auto loan, it is important to consider the down payment you can make. Will it result in favorable interest rates? Making a high down payment reduces the monthly payment, meaning you pay back less interest over the life of the loan.

But there are also potential downsides to making a large down payment. It can significantly diminish your savings account, meaning you will have no cushioning in emergencies.

It is also good to consider that some auto lenders may refuse to offer financing if you offer to make a larger down payment. This is because some lenders have minimum financing standards that prevent them from offering auto loans less than a certain amount.

For example, some lenders may refuse financing if you offer to pay 90% on a vehicle costing $25,000.

Calculating an Ideal Down Payment

Auto Loan Rates

Many experts agree that a solid downpayment should be 10%. If you can pay more without going against the lender’s policies, do it so it reduces the total interest paid. If you are unable to stick to the standard, here’s how you can calculate an ideal down payment :

Determine a practical budget. Review your monthly income, expenses, and goals to understand your financial situation. It will help determine how much you can comfortably allocate toward a car loan without straining finances.

Check loan eligibility. Investigate the minimum down payment requirements of potential lenders. Some lenders may have specific guidelines regarding down payments, so knowing these requirements and determining if you can meet them is essential.

Evaluate the total cost. The LTV ratio is the ratio of the loan amount to the car’s value. A lower LTV ratio is more favorable because it represents a smaller loan relative to the vehicle’s value. It can result in better interest rates and loan terms.

Find out the car’s value. Research the fair market value of the used car you want to buy. Some websites can estimate the car’s value based on factors like make, model, mileage, and condition.

Determine an affordable monthly payment. An online loan calculator can estimate your monthly payments based on different down payment amounts, interest rates, and loan terms. Determine a monthly payment that sticks to your budget.

Calculate the downpayment. Deduct the amount you plan to borrow from the total cost of the car to calculate the downpayment. For example, if the car costs $20,000, and you intend to borrow $15,000, your down payment would be $5,000.

The key is to balance between the down payment and your emergency fund. Avoid depleting your savings since the financial cushion is important for unexpected expenses.

It is worth noting that some types of loans, such as lease buyout loans, rarely require a down payment. Similarly, some lenders are willing to offer financing with no down payment. However, it is always good to make a down payment unless it will affect financing options.

The Best Car Loan Rates 2023

Titan Auto Group

Titan Auto Group is one of the leading car dealership lenders in Phoenix, Arizona, serving many other states. The platform is a buy here pay here dealership specializing in preowned cars. Their inventory extends to trucks, vans, and SUVs.

The primary advantage of working with Titan Auto Group is that they do not require borrowers to have a high credit score. In fact, the platform also offers financing to people with no credit score. Titan offers online and in-person shopping options. The process takes 5 to 10 business days with delivery from a transporter.

The platform offers competitive car loan rates, especially for people with poor or no credit score. In addition, they have a prequalification process using basic information.

Consumers Credit Union

Consumers Credit Union offers used car loans with some of the best rates. The credit union offers two options for car financing. The first is working directly with the institution by applying for the loan. The alternative is working with their dealership partners within West Michigan for customized financing options.

Consumers Credit Union has the benefit of no prepayment penalties and competitive rates with various terms. Additionally, borrowers can access higher loan amounts and prequalification through a soft credit check.

The credit union has a Credit Smart Program for those struggling to get financing due to their credit score. It is worth noting, however, that you must be a union member to access loan financing.

PenFed Credit Union

Best Car Loan Rates 2023

PenFed Credit Union is a competing credit union that offers loan amounts of up to $150,000. The union acts as a car-buying service through a partnership with TrueCar.

PenFed has loan terms of 36 months to 84 months with auto refinance loans. The platform allows borrowers to finance up to 110% of the amount needed.

Borrowers can access the loans in person or online through their website. A loan application does not require membership, but you must join the credit union if you want to accept the loan after approval. The union’s minimum rate is 5.24% APR, but they do not disclose if there is a minimum credit score requirement.

CarMax Auto Finance

CarMax Auto Finance is a great used car loan lender. The platform offers access to a large inventory of used cars.

The primary allure of CarMax is no minimum credit score requirements, making it an ideal choice for borrowers with bad credit. In addition, they have a prequalification tool that does not impact your credit.

Borrowers enjoy a low minimum loan amount and the choice of using co-borrowers. Additionally, the platform does not charge early payoff fees. Unfortunately, CarMax is not available in all states, so borrowers need to check their eligibility.

Capital One Auto Finance

Capital One is among the best banks for used car loans. The bank offers prequalification to check estimated terms through a soft credit check. After prequalification, borrowers can view monthly payments and rates as they browse car deals.

The bank offers competitive rates, which can be better for existing clients. Capital One has an online navigator tool for borrowers to browse a new or used car from the bank’s participating dealerships.


If you are looking for a good online financing institution, consider Carvana. The platform offers some of the best loan rates in 2023. The APR starts at 6.85%, and the platform is strictly for used vehicles.

Terms last 36 to 73 months, and borrowers do not face an early payoff penalty. Carvana strictly offers loans for cars in its inventory, and borrowers can complete the application and sale online.

You can requalify without a hard credit check and see estimates for each car you browse on the website. The prequalification offer remains valid for 45 days, which is more than what most lenders offer.

After getting the right car, borrowers can schedule pickup or delivery to a destination. Carvana pulls your credit at this point, and you receive the finalized loan terms.

Despite the many benefits of Carvana, the platform is only available in some states. Therefore, individuals should check their eligibility before settling for this option.

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Tips for Effective Negotiation for Auto Loans


Negotiating with lenders is crucial to getting the best rate. When selecting an auto loan, effective negotiation can help you secure more favorable loan terms and interest, thus potentially saving you money. Here are tips for effective negotiation:

Be professional and polite.

It is always advisable to approach negotiations with professionalism and politeness. Making a good first impression and building on it can be beneficial when it comes to loan approval. Remember that lenders are more likely to cooperate with respectful and considerate borrowers.

Focus on the total cost.

Rather than focusing only on the monthly payment, consider the total cost of the loan. This includes the interest and fees. This approach can help you secure a better overall deal. When negotiating, address the total cost and work your way into reducing it in full.

Ask the lender if they offer rate discounts for factors such as automatic payments or setting up accounts with them in the case of banks and credit unions. In addition, you can use the market conditions to negotiate for lower interest rates.

Express willingness to commit.

Indicate your willingness to commit to the loan, but emphasize that the terms must be favorable for you. Lenders are more likely to work with borrowers who show commitment. Making a downpayment (no matter how small) is one way to show dedication.

Know When to Walk Away


Borrowers should know when it is time to walk away from a lender. Look out for the following signs:

Excessive fees.

If the lender insists on substantial fees that make the loan more expensive in the long run, consider walking away and exploring other options.

Hidden terms.

If the lender introduces hidden or unexpected terms during negotiation that were not in the initial discussion, treat it as a red flag. Reconsider the deal and find other options.

Unreasonable terms.

People with poor credit scores will likely come across lenders with unreasonable terms. However, there are standard rates even for bad credit auto loans. So, if the owner offers inflexible terms, go to another one.

Pressure tactics.

And finally, if you notice that the auto lender is using pressure tactics to rush you into a decision, it is a clear sign to walk away. Reputable lenders do not employ such tactics, giving you time to consider the loan.

Special Considerations

Tips for Effective Negotiation for Auto Loans

While securing an auto loan is a straightforward process for many borrowers, there are certain special considerations to remember to get the best auto loan rate. They include:

Refinancing Options

Explore the option of refinancing your auto loan in the future. If your credit improves or market interest rates drop, you may be able to refinance for more favorable terms and lower interest rates. Refinance auto loans are often available with various lenders, so ask before the application.

Co-Signers and Joint Applications

If you have a lower credit score, you should consider involving a co-signer or co-borrower with a stronger financial profile. Their involvement can enhance your ability to qualify for better loan terms or at least the average auto loan rates.

Lease vs. Purchase

Consider whether leasing or purchasing a vehicle aligns better with your needs and financial goals. Leasing can provide lower monthly payments, but purchasing offers ownership and potential equity in the vehicle.

Additional Tips for Saving Money

best auto loan rate

Early Loan Repayment

Check with your lender to ensure that there are no prepayment penalties. If not, consider making early or larger payments to pay the loan more quickly.

Maintenance and Insurance

Maintain your vehicle regularly to prevent costly repairs down the line. Additionally, shop for insurance quotes to find the most cost-effective coverage.

Biweekly Payments

Opt for biweekly payments instead of every four weeks. Over a year, this can result in an extra payment, reducing the loan term and overall interest costs.

Budget Discipline

Maintain discipline in your budget to ensure you have the financial capacity to meet your monthly car loan payments without financial strain.

No Fighting With Titan: Best Loan Funding Rates for Used Cars

Best Loan Funding Rates for Used Cars

If you’re in the market for a pre-owned vehicle and want to work with a lender that offers auto loans no matter your credit score, look no further than Titan Auto Group. We understand that finding the right financing option can significantly impact your overall car-buying experience. Contact the best auto loan lender today.