Best Car Loans Of February 2023

A car is an expensive purchase, but choosing the right lender can save you thousands of dollars in interest charges and fees. Plus, you want your car shopping experience to be easy and transparent so that you’re confident about the terms you’re getting.

CNBC Select evaluated dozens of auto loan lenders based on their rates and terms, selection of loan options, car-buying experience and other factors. Below are our picks for the best auto loan providers, whether you’re shopping for a new vehicle or looking to refinance your existing car loan. (Read more about our methodology below.)

Who’s this for? Whether you’re shopping for a new or used car or want to refinance your auto loan, PenFed can be an excellent choice. The credit union offers affordable rates, flexible loan amounts and term lengths and charges no prepayment penalty. Additionally, you can prequalify for a new or used car loan and see estimated terms without a hard credit check.

While you can secure financing through PenFed for a car loan at the dealer of your choice, you’ll find the most appealing deals using the credit union’s car buying service, powered by TrueCar. Benefits include members-only cash back incentives and special loan discounts.

If you’re interested in refinancing, the online application process is also easy and transparent. You can also prequalify without any impact to your credit to check how much you can save if you refinance with PenFed. Note, however, that PenFed doesn’t refinance its own car loans.

Note that while you don’t need to be a member to apply, you will need to sign up for a PenFed membership to receive your funds. PenFed membership is open to everyone — you just need to open a PenFed savings/share account with a $5 deposit and maintain a $5 account balance in order to keep your membership active.

Who’s this for? When it comes to auto financing, traditional banks can offer competitive rates, especially to existing clients. If securing the most favorable loan terms is your goal, you might want to consider Capital One Auto Finance.

Capital One makes the car buying process convenient. Using the bank’s online Auto Navigator tool, you can browse used and new cars from participating dealerships. Prequalification is also available, allowing you to check estimated terms with a soft credit check. Once you prequalify, you’ll see monthly payments and rates as you browse car offers.

If you’re refinancing, you can prequalify without impacting your credit as well. Capital One will only place a hard inquiry on your credit report when you officially apply.

Who’s this for? If you want to shop around for car loan rates without filling out applications at multiple lenders, myAutoloan can be a great option.

MyAutoloan isn’t a dealership or financial institution. It’s a virtual platform designed to connect car buyers with lenders that best fit their needs. To begin the process, you’ll need to fill out a quick form. Then, myAutoloan will match you with up to four prequalified loan offers. Prequalification will not hurt your credit — you’ll only get a hard inquiry if you choose to apply with one of the lenders you’ve been matched with.

Additionally, myAutoloan offers a solid selection of auto loan types, including new and used car loans, lease buyouts and refinancing.

Who’s this for? Carvana can be a good solution if you want as simple of a car buying process as possible.

While many lenders offer an online application, there are usually extra steps you need to take to finish the car buying process, such as visiting the dealership or getting in touch with the lender to finalize financing. Carvana simplifies the process by only offering loans for cars from its inventory, keeping the entire process in-house.

You can prequalify online without a hard credit check and see personalized estimated terms for each car you browse on Carvana’s website. The prequalification offer expires in 45 days as opposed to the 30 days you’d get with most other lenders.

Once you find the right car offer, you can schedule a pickup or delivery. At this point, Carvana will pull your credit and you’ll get finalized loan terms.

Who’s this for? CarMax Auto Finance is a good choice for consumers who are on the market for a used car and want access to a large inventory.

As the largest used-car retailer in the U.S., CarMax also provides financing for the cars it sells. The application process is easy and there is no minimum score requirement to qualify. You can use the retailer’s prequalification tool to get personalized terms, such as APR and monthly payments, with no impact on your credit.

Further, CarMax offers a Three-Day Payoff program if you find a better loan offer within three days of closing your CarMax loan. For that reason, it pays to shop around for financing if you’re going with CarMax — especially since its policy doesn’t allow for price negotiation.

Who’s this for? Autopay is worth considering if you have an existing car loan you’re looking to refinance.

Similar to myAutoloan, Autopay is an online platform connecting borrowers with financial institutions. While you can finance a new or used vehicle using Autopay, what really stands out is its wide selection of refinancing products. These include both traditional and cash-back financing, as well as lease-buyout financing.

You can prequalify without a hard credit check to get multiple loan options from banks and credit unions. If you choose a lender to move forward with, the financial institution will perform a hard credit inquiry and review your information and documents to finalize the loan terms. Note that the final approval might take up to two days.

To get the most favorable financing terms when buying a car, you’ll need at least good or excellent credit — a credit score of 670 and greater. That said, it’s not impossible to get approved for a car loan even if your credit leaves a lot to be desired. Lenders have different credit score requirements and many work with customers with bad or fair credit. Plus, they consider multiple other factors when reviewing your loan application, such as your income and other debts.

• A low credit score: While it’s possible to get approved for a car loan with poor credit, some lenders might have credit score requirements preventing those with low credit scores from qualifying.
• High debt-to-income (DTI) ratio: If a large portion of your income goes toward paying debt, an auto loan lender may see it as a red flag. Generally, you want your DTI to be under 50% to qualify for a car loan.
• Not enough verifiable income: A car loan lender may also have income requirements. If you can’t prove that you meet them, your application may be rejected. To verify your income, your lender may ask you to provide recent pay stubs, bank statements or two to three years of tax returns.

First, remember that the best deals are reserved for those with high credit scores. If your credit could use some work, it might be a good idea to take time to improve your scores before shopping for a car.

To determine the best auto loans, CNBC Select analyzed more than a dozen car loan providers, including banks, dealerships and online marketplaces.

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