#lowest auto loan rates
Who Offers the Lowest Auto-Loan Rates? It s Not Your Local Bank
NEW YORK (MainStreet ) — Automakers offer consumers the least-expensive car loans by far, with credit unions placing second and banks trailing well behind, a WalletHub analysis has found.
“Auto manufacturers are rebounding from a terrible economy when people weren’t buying new cars, so even though things are improving, they’re still sweetening the deal [with low rates],” says Jill Gonzalez of WalletHub. a social-media-based financial-advice website that recently studied what more than 150 lenders and car companies charge for loans.
WalletHub found that during the fourth quarter, manufacturers typically offered customers with good credit 1.92% annual percentage rates for three-year car loans to finance each brand’s best-selling model. By contrast, the average credit union wanted 2.44% for similar loans, while the typical bank offered 4.31%.
“Car manufacturers charge the lowest auto-loan rates by a long shot,” Gonzalez says.
Read More: Men Are From Mars, Women From Venus When It Comes to Car Shopping
Of course, those low average rates stem in a large part to all of those zero-percent financing deals that automakers offer on specific models.
For consumers interested in cars that lack such incentives (or if models offer a choice of low-interest loans or big rebates and you choose cash), Gonzalez says financing though a credit union “would be the next best thing.”
She says banks, especially small local ones rather than big national lenders that offer the most competitive rates, should be your last choice. “For auto financing, [local banks] are definitely not the best way to go,” Gonzalez says.
WalletHub also recommends that consumers who don’t get loans through manufacturers proceed with caution if dealers offer to arrange some other type of financing for them.
Read More: 2015’s Best Automotive Buys, From Small Cars to Luxury Rides
It’s true that dealers typically have a network of lenders who’ll work with such buyers to get loans, but Gonzalez says some salespeople will tack on extra interest without telling customers.
She noted that a 2011 Center for Responsible Lending study estimated that new-car dealers add 1.01 percentage points to the average customers’ loan rate, costing the public an extra $4.1 billion a year.
Regardless of what source you end up using for loans, Gonzalez recommends doing some homework before setting foot into a dealership, starting by shopping around with several lenders ahead of time to see what rates they’ll offer you.
She also suggests pulling your credit score from the three national credit bureaus (Experian. TransUnion and Equifax ) and bringing hard copies of their reports with you to the dealership.
“If someone says you have bad credit and you know you [don’t], they can’t argue with that,” Gonzalez says.
— By Jerry Kronenberg for MainStreet