Finding the right auto financing for your needs can be a big job. We’re here to make it easy.

Finding the best auto financing can be a tremendous challenge. There are a multitude of companies who offer auto financing, and the variety of options can be incredibly confusing. The following will help you find the best auto financing for your needs.

What is auto financing?

Auto financing allows car buyers to borrow money to purchase a new or used car. Banks or lenders provide auto financing, and there are many out there. The car you purchase acts as security against the loan and is known as a secured loan for this reason. The best way to find a lender is to do an Internet search.

Which banks or lenders offer auto financing? How do I find them?

Woman showing auto financing options on ipad

There are many lenders and banks who offer auto financing; they can range from big to small, local to national and international. To find out if your bank or lender of choice offers auto financing, do a quick Internet search.

There are a number of large banks out there that provide financing. Some of the largest ones are:

  • Bank of America
  • TD Auto Finance
  • Capital One
  • Chase
  • Wells Fargo
  • Santander
  • S. Bank

There are also a number of smaller banks and credit unions that provide auto financing. Some of the small ones are:

  • Capital One Auto
  • Most local community banks
  • Most credit unions

In addition to traditional lenders, auto manufacturers also offer auto financing through their financing arms. A few of these include:

  • Nissan Finance
  • Hyundai Motor Finance
  • Mercedes-Benz Financial
  • Volkswagen Credit
  • Lexus Financial
  • BMW Financial
  • GM Financial

Online lenders also offer auto financing. Some online auto finance companies include:

  • Ally Bank
  • ING Bank

You can also get an auto loan other ways, including using home equity or borrowing from friends and family.

Regardless of the auto-financing path you choose, be sure to do your homework before you commit.

How does auto financing work?

Auto financing lets you borrow a set amount of cash to finance a vehicle you are purchasing. Each month you pay back a portion of that loan amount along with a set amount of interest.

When you sign a loan agreement, you are agreeing to pay back the amount of principle you’ve borrowed, plus an agreed-upon amount of interest, over a set period of time.

There are a few things you should know about auto financing terms

  1. The principle of the loan is the amount of money you are borrowing
  2. The interest on the loan is determined by your credit worthiness — AKA your credit score, the fees that a lender charges (sometimes termed lender fees) are also generally rolled into the interest rate or APR (annual percentage rate)
  3. The duration or term of a loan is the length of time that you’ll have to pay back the loan
  4. Most auto financing loans range anywhere from 36 to 72 months

At the beginning of the loan, you will pay down a larger portion of the interest on the loan. You won’t chip away much at the principle until the very end when you approach the payoff date.

The interest rate or APR can vary greatly based on a number of factors, which include:

  • Your credit score
  • The term of the loan — the longer the term, the higher the interest rate
  • The age of the vehicle. Newer cars tend to qualify for lower interest rates
  • The amount of your down payment

Should I get pre-approved for auto financing? Why?

Yes! To save money, you should get pre-approved for auto financing before buying a new or used car.

Why should you get pre-approved?

  • It can give you more control over the terms of the loan as well as the impact the loan will have on your credit
  • You can have more control over negotiations
  • You can save your credit because some lenders will do a soft credit pull instead of a hard credit pull
  • You can save money by shopping for the best interest rates

AutoGravity offers an easy pre-approval process – more details available here. With AutoGravity, you can send in one application and have several loan offers delivered to your inbox in moments.

Can I get auto financing with a 600 credit score?

Ipad showing components fico 600 score

Yes, you can get auto financing with a credit score of 600 or below, but it may require that you pay more in interest or put more down on the car you’re buying. It may cost you more to buy a car because a score below 600 is considered poor credit.

A credit score below 600 indicates that you have multiple late payments and/or you’ve failed to pay at all. Failure to pay is also referred to as delinquencies or default.

 You can become delinquent if you fail to pay just one month.

Default happens when you are more than 180 days late, and the lender or creditor assumes you will never pay.

When you have a credit score of 600 or less, you’re considered to be a subprime borrower. Subprime means that you have a poor credit history and will likely be charged much higher interest rates to secure auto financing.

According to NerdWallet, at the end of 2017, the average credit score to buy a new car was 713. The average credit score to buy a used car was 656. Fret not, though. Almost 20% of car loans are granted to buyers with credit scores below 600.

In fact, if your credit score is below 630, you could be denied auto financing. Don’t worry. Most auto manufacturers with financing arms are well versed in dealing with subprime borrowers. They likely will have options that may work for you.

Additionally, auto loans offer a bit more flexibility than other types of financing, so most banks or lenders will have a product that will work for you.

If your score is 600 or below, be sure that you can answer any questions that might come up about the negative notes on your report. To do that, pull your credit before you apply.

Look over your report and note where any negative marks exist. Then, find a way to focus on the positive things you’ve done to repair or change the score. Proving and focusing on things like the following will help allay the issue of poor credit.

  • A stable job; bring your paystubs as proof
  • If you own a home, show proof of mortgage payment
  • Present records of past car payments to show that you pay regularly
  • Cellphone payment history can be helpful, so show a history of paid invoices
  • Demonstrate a history of making insurance payments

You’ll need to prove at least six to eight months of good payment history to convince a lender or bank that you are a good candidate for a loan. If you’ve been late on payments, explain why and provide detail of how you’ve worked to overcome those setbacks.

Should you be denied a loan because of your sub-600 credit score, go to other lenders that specialize subprime auto loans. Some of those vendors include:

  • Capital One
  • MyAutoLoan
  • CarFinance

You can also do an internet search for subprime lenders who offer car loans.

How do I get auto financing if I have a credit score above 600? What are the best financing options for someone with a credit score above 600?

You can get auto financing with a credit score above 600 by following the same process you would for securing any loan. Do your research, apply, and wait to see if the lender approves your application.

Any credit score above 630 is considered good. Generally, you’ll get far better interest rate. The closer to 850 your score is, the better — and the less interest you’ll pay.

If you have a credit score above 630, many auto manufacturer lenders are your best bet, including:

  • BMW Financial
  • Mercedes-Benz Financial
  • GMAC
  • Lexus Financial
  • Hyundai Motor Finance

Most dealers and auto manufacturers are accustomed to dealing with customers who have a wide range of credit scores.

If you select a big bank and have a score of 630 or higher, it makes sense to check out some of the rates from the following lenders:

  • Capital One Auto
  • TD Auto Finance
  • Bank of America
  • Wells Fargo
  • Chase

It could also pay to check with your local credit union and community banks to see what kind of financing rates they offer and find the best one for you.

What makes a good auto-financing partner?

Two man shaking hands

A good auto-financing partner will offer you a good interest rate and good term on your auto loan. They’ll also work with you should something arise and you have to adjust your payment schedule.

By doing your homework and coming to the dealer prepared with pre-approved auto financing, you can ensure that you find the best auto financing for you.

Summary
How to Find the Best Auto Financing with Great Rates
Article Name
How to Find the Best Auto Financing with Great Rates
Description
Find the best auto financing possible with top financing sources by having us help do your homework. Then go to the dealer pre-approved and ready to buy.
Author
Publisher Name
AutoGravity
Publisher Logo
Author

Contributing writer for Autoweek magazine, Forbes, Arstechnica.com, Motor Trend, TheDrive.com, and Fortune. Abigail Bassett is an Emmy winning journalist, video content producer, and manager who has covered a wide range of events including everything from breaking news and world events to premiere launches and unveilings over the last 15 years.  Abigail spent more than 10 years as a Senior Producer at CNN in New York and she currently lives and works as a freelance writer in Los Angeles. Her clips have appeared in Autoweek Magazine, Forbes, Arstechnica, Motor Trend, TheDrive, Fortune, and a number of other top-tier outlets.

Write A Comment

Shop Cars How It Works