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Buying your first car is exciting — until you realize you need an auto loan. Soon, you’re facing interest rates, loan terms and which lender is giving you the best value auto loans. As a first-time car buyer, you may not have a long credit history, making things a little more challenging.
Thankfully, some lenders specialize in the best-value auto loans for first-time car buyers. Driving your first set of wheels may be easier than you think, and when you have all your facts, you’ll have a loan that doesn’t drain your savings.
1. Best Overall Auto Lender — PSECU
The Pennsylvania State Employees Credit Union — PSECU — has been serving customers since 1934. It’s known for offering competitive financial products, including first-time car buyer financing. Its loan repayment rates are some of the lowest in the industry. While the name may hint at its origins as a state employees facility, the credit union now serves a much wider audience, offering auto loans for first-time car buyers.
Key features:
- Competitive annual payment rate, usually lower than traditional banks
- Qualifying members enjoy rate discounts
- Loan amounts start at $500
Loan criteria:
- Must be a PSECU member, but it’s easy to apply
- Minimum credit score of 600+
- Finances new and used vehicles
2. Runner-Up Choice — Capital One Auto Finance
Finance your vehicle through Capital One’s auto finance, a leading financial institution with many dealerships. You must purchase a car through one of its participating vehicle dealers, as it doesn’t offer private financing. One benefit is the application process, which involves a “soft” prequalification credit check that won’t remain on your credit record or affect future applications, making them a suitable choice for first-time buyers.
Key features:
- No-impact, online prequalification process
- Partners with thousands of car dealerships nationwide
- Accepts lower credit scores, from 500 points
Loan criteria:
- Minimum loan amount of $4,000
- Only dealer purchases, not open to private sales — with 2.1 million odometer fraud cars on the road, it’s no wonder.
3. Trusted Institution — Bank of America
One of the largest banks in the U.S. is Bank of America, and its strong reputation and competitive products make it a must-try for new buyers. The bank offers loans on new and used cars, with special discounts for existing customers. Upon approval, a 30-day lock on the interest rate gives you enough time to decide between a new e-truck or a used family sedan.
Key features:
- Enjoy discounts of up to 0.50% interest if you’re an existing customer
- Low APR rates for anyone with an excellent credit score
- Will finance private-party sales if there is paperwork for legal reasons
Loan criteria:
- Minimum loan starts at $7,500 — except for Minnesota, where it’s $8,000
- Vehicle must be manufactured in the last 10 years or new due to the 20% depreciation that a car faces within the first year off the showroom floor
4. LightStream
If you prefer shopping online for your credit options, LightStream — a division of SunTrust and Truist — should be on your list. It finances loans for any vehicle, from passenger cars to trailers, trucks and even bikes. Unlike most other lending institutions, its approach is unique because it does not limit vehicle age or mileage when issuing auto loans for first-time car buyers.
Key features:
- No up-front fees or prepayment penalties
- Low APRs with the maximum interest rate fixed at 29.5% and the minimum repayment schedule at 24 months
- Loan amounts up to $100,000
Loan criteria:
- Only accepts good to excellent credit scores of over 660 VantageScore credit scores, though the exact score remains unadvertised.
- There is no preapproval process, as loan approval requires a hard credit check.
5. PenFed Credit Union
Another trusted name in banking is Pentagon Federal Credit Union — PenFed — which has been offering competitive loan repayments since 1935. Like PSECU, PenFed originally served military personnel, but membership is now open to anyone who joins the organization.
Key features:
- Low interest rates for first-time buyers
- No hidden fees or prepayment penalties
- Membership is open to all with a small donation
Loan criteria:
- PenFed membership and a good credit score are required to apply for loans
- Loans up to $125,000
6. Carvana Auto Loans
If your car dream seems out of reach because of poor credit choices, try Carvana as your go-to institution. Depending on other factors in the loan consideration, the institution offers loans with poor or no credit scores. Its popular online car-buying platform handles financing quickly.
Key features:
- No minimum credit score as long as you’re not bankrupt
- Works exclusively for Carvana vehicles via the online platform
- Instant online approval
Loan criteria:
- A single down payment is required to secure the loan and chosen vehicle
- Must earn at least $5,100 per year
7. Chase Auto Loans
One of the biggest U.S. banks, Chase, offers competitive repayment options — especially for those with an excellent credit score. Apply at a branch or any network dealership as part of your application process once you’ve found the car of your dreams. The prequalification process uses a soft inquiry, which doesn’t affect your credit record.
Key features:
- Special discounts for existing clients
- Competitive APRs for those with good credit scores
- Online application or in participating dealerships for easy approval
Loan criteria:
- Purchases through participating dealerships of $4,000 to $750,000
- No private-party buys allowed
8. MyAutoLoan.com
Online lending marketplaces like MyAutoLoan.com connect multiple lenders to you with the click of a button. The marketplace specializes in financing on a budget, even if your credit score isn’t ideal. It offers a soft credit check for preapproval as long as you have at least six months of credit history.
Key features:
- Access up to four loan options for quick comparisons
- Offered on dealership and private purchases
- Available for new and used cars
Loan criteria:
- Depends on the lender’s offer you wish to accept
9. Navy Federal Credit Union
Founded in 1933, the Navy Federal Credit Union — NFCU — is the world’s largest credit union, with $178 billion in assets, exceeding the nearest lender three times. However, to enjoy the benefits of these loans, you have to be a member of the military services on active duty or a family member. Several perks apply to active service members, including additional discounts.
Key features:
- Extremely low rates for military-affiliated borrowers
- Active service member discounts
- Financing available on new and used cars
Loan criteria:
- Different rates for new and used cars, from $250 to $500,000
- While NFCU doesn’t disclose the minimum credit score, higher scores earn lower APRs
What Makes a Great Auto Loan?
Not all auto loans offer the same benefits, and it’s best to know what you’re getting into with a legally binding agreement before you sign it, as you wouldn’t want your car repossessed. Here’s what to look for when shopping for vehicle financing:
- Low interest rates: The lower the APR, the less you will repay on interest and final costs.
- Flexible loan terms: Short-term loans accrue less interest, but longer terms are lower on repayments, making them affordable.
- Down payment options: The larger your down payment, the more interest you save. First-time buyers often qualify for a no-pay down payment. However, if you are considering buying an electric car, apply for the e-vehicle tax credit, and you might be able to use the rebate as a down payment.
- Credit-friendly approval: Look for a lender that doesn’t require extensive credit history or scores.
- Preapproval processes: Find a lender that shows you the rates and terms before commitment. With flexibility, you can also consider different car options until you find one that’s within your budget as car prices increase due to factors like the proposed 20%-60% levy on imported automobiles.
Who Counts as a First-Time Car Buyer?
You may think of a first-time car buyer as being young with a few months’ payslips, but if you’ve always rented cars, you also qualify for the same perks to help you on your journey toward owning your vehicle. Many lenders offer introduction programs to help first-time borrowers and make auto ownership easier.
First-time car buyers are those who:
- Have never bought a vehicle with a loan before — so if you inherited a car or bought one cash, you may qualify for benefits if you need a loan to buy another.
- Have limited credit history or is new to financing.
- Might not have a strong credit score yet.
- May need assistance with lower down payments and flexible terms.
FAQs
What Is a First-Time Car Ownership Program?
Some lending institutions and credit unions have programs that assist first-time auto buyers with the process and offer discounted rates to help increase their financing cap so they can more easily afford a first vehicle purchase. These programs also require a lower credit score than an experienced buyer — some ignore the down payment that secures most loans.
How Do I Quickly Pay Off My First Car Loan?
Start by qualifying for the lowest APR with a great credit score and paying at least 20% of the vehicle value as a down payment. Ensure you make monthly repayments and save up for additional payments that help reduce the total loan amount.
What Are the Considerations Affecting My Credit Score?
Several factors influence your credit score, including your payment history, the total credit you owe, the type of credit you have and how experienced you are at managing it, any new accounts you may have opened recently and your current balances and available limits.
Your Auto Loan Awaits
Buying any large-value item on credit or via loan can be intimidating, but with careful preparation and consideration of your financial profile, you can make the best-informed decision. Shop around for a suitable auto loan to help you buy that first car you’ve always dreamed of.
