How We Rate Auto Loans

Insider experts pick the best products and services to help you make smart decisions with your money (here’s how). In some cases, we receive a commission from our partners, however, our opinions are our own. The terms apply to the offers listed on this page.

If you’re looking to borrow money to buy, refinance or lease a car, an auto loan could be a great option for you. There are many lenders to choose from. We critique them and their loan offerings in reviews and guides that help you make the best loan decision possible.

To make sure we rate each of them equally, we use a rating system that considers a variety of factors, from interest rates and fees to customer service and ethics. We consider the pros and cons of each company and product, comparing them to others that are available so you can decide which personal loan suits your particular needs.

What we look for when qualifying auto loans

We rate all auto loan products in our reviews and guides on a scale of 1 to 5. The overall rating is a weighted average that takes into account seven different categories, some of which are judged more than others. Is it so:

  • Interest rate (20% qualification)
  • Fees (20% of qualification)
  • Length of terms and loan amounts (15% of qualification)
  • Borrower Accessibility (15% of score)
  • Variety of loans (15% qualification)
  • Customer service (7.5% rating)
  • Ethics (7.5% of the grade)

Each category is weighted based on its importance to your lending experience. Rates and fees have the most direct impact on the total cost of your loan, so we weight them more. Customer service and ethics are still very important parts of the lending experience, but they don’t directly relate to the terms of a personal loan, so they have less of an impact on the overall score.

Interest rate (20%)

We primarily look at the minimum interest rate a lender offers to determine your qualification. Many auto loan lenders don’t list their maximum rates, making it difficult to factor into our rating. We look at how often the variable rate changes and what metrics are used to change rates.

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examples

  • A lender will receive 5 of 5 if your minimum APR is one of the lowest in the market (around 2.99%) and you keep your rates relatively stable
  • If a lender has a higher minimum APR but still has low rates (around 4%) and changes their rates a little more often, they will win. 3 of 5.
  • Lenders with significantly high minimum rates and rates that fluctuate frequently will get 1 of 5.

Fees (20%)

Lenders can charge a variety of fees, from origination fees to late payment penalties. We prioritize lenders who charge little or no fees.

examples

  • If a lender does not charge a fee, you will get a 5 of 5.
  • Lenders with a small origination fee and a reasonable late payment fee will receive 2.5 of 5.
  • Lenders will get a 1 of 5 if they charge high origination fees that take a significant portion of your total loan amount and late fees that add up if you fall behind on payments.

Length of terms and loan amounts (15% of qualification)

We determine if the company has a variety of payment terms, offering options for borrowers who want to pay off their loans quickly and save on interest, as well as those who want to spread their costs over more years. However, we try to focus on lenders that don’t force borrowers to take on too long a term.

Longer terms generally come with a higher interest rate that you’ll have to pay for longer. Also, the longer the term, the more likely your car’s value will decline to the point where you owe more than it’s worth. Generally, 60 months is considered the maximum length of term you should consider.

We also look at both the minimum and maximum amount of a business loan. A smaller minimum makes a company more accessible to borrowers who need a small amount of financing for their car. A high maximum allows borrowers who want a more expensive car to get one.

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We also examine whether the company sets repayment terms or whether the borrower can choose.

examples

  • A lender will earn a 5 of 5 if you have a minimum loan of at least $2,500 and a maximum of at least $50,000, along with terms between one and seven years.
  • Businesses with a minimum loan of $5,000 or more, or a maximum loan of $35,000 or less, or a suggested long term (about seven years) get a 3 of 5.
  • Lenders will receive a 1 of 5 if they have extremely tight loan amount ranges or select the term length for you from a limited number of options.

Variety of loans (15%)

We see if the lender offers loans for new and used cars, refinancing and lease purchase. The more options you have, the better.

examples

  • Lenders with all four options will get 5 of 5.
  • Lenders with three of the four options will win 3 of 5.
  • Lenders will receive a 1 of 5 if they have only one option for the loans they make.

Borrower affordability (15%)

Lenders can only serve borrowers in certain states, or with certain credit scores and income levels. We look at how accessible the lender is to borrowers with a variety of backgrounds.

examples

  • Lenders that are available in all states and have minimal or no credit requirements will get 5 of 5.
  • A business that is available in almost every state or has slightly more stringent eligibility requirements will receive a 3 of 5.
  • Lenders will get a 1 of 5 if they are not available in most states or have high barriers to entry for most borrowers.

Customer service (7.5% rating)

We review the different ways you can contact customer support. For example, we look at whether you can reach someone by phone, live chat, email, or regular mail. We also review customer service hours and give high marks to companies that offer 24-hour service.

examples

  • A lender will receive 5 of 5 if you offer multiple means of contact and are open seven days a week for a significant part of the day.
  • A lender with customer service available six out of seven days and many ways to contact them will win. 3 of 5.
  • Lenders will get a 1 of 5 if they have limited ways for you to contact them and are only available during certain hours of the traditional business week.
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Ethics (7.5% of the grade)

We analyzed the company to see if there have been any scandals in the last three years. We investigate whether the business is known to be racist or sexist with its customers or staff, or has predatory lending practices. We also consider the company’s Better Business Bureau rating.

examples

  • A lender will receive 5 of 5 if it has been scandal-free in the last three years and has an A+ rating with the Better Business Bureau.
  • If a company has no scandals and a BBB rating of about B, it will get a 3 of 5.
  • Lenders will get a 1 of 5 if they have been part of a significant scandal in the last three years or if they have a BBB rating of D or lower.

Our ratings can help you determine which lender is best for you. Highly rated auto loan lenders in each category will be our highest rated overall lenders. Still, consider options with lower overall ratings if they are a better fit for your individual situation.

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