Comparing Auto Loan Interest Rates and Lenders: A Guide to Shopping Around

Why Comparing Auto Loan Interest Rates Matters

When buying a car, most people focus on the sticker price, but the auto loan interest rate you secure can be just as important. A small difference in interest rates between lenders can add up over the life of your loan.

With banks, credit unions, online lenders, and dealerships all competing for your business, it pays to shop around. Here’s how to compare auto loan interest rates, what to look for in lenders, and potential steps you can take to find the best deal.

What Are Auto Loan Interest Rates and Why Do Lenders Offer Different Interest Rates?

An auto loan interest rate is the interest percentage charged by a lender when you borrow money to finance a vehicle. While your credit score, loan term, and vehicle type matter, interest rates also vary widely by lender because of:

• Business models: Banks, credit unions, and online lenders all operate differently.
• Promotions: Some lenders temporarily offer discounted interest rates.
• Risk profiles: Lenders may specialize in certain credit score ranges.

💡No single lender always has the lowest interest rate, that’s why comparison shopping is a good way to see your best options at the current time.

Where to Get Auto Loans 

There are a few common institutions that offer auto loans for new and used cars. These include:

• Banks
• Credit unions
• Fintech companies, like Upgrade
• Dealerships

Key Factors to Compare When Shopping for Auto Loans

Interest Rate vs. APR (Annual Percentage Rate)

While the two terms might seem similar, APR and interest rates are not exactly the same. It’s best to compare auto loan APRs, not just interest rates, to get a fuller picture of the cost of borrowing. 

• Interest Rate: The cost of borrowing the principal loan amount, excluding fees, expressed as a percentage.
• APR: The total yearly cost of borrowing money, expressed as a percentage, including interest and fees. Learn more about APR.

Loan Term Options and Their Impact on Costs

Shorter terms can typically reduce your loan cost overall. While a longer loan term can reduce your monthly payment, you may end up paying more interest over the life of your loan.

Fees and Penalties to Watch For

• Origination fee: Amount charged by some lenders to cover the costs of processing and approving a loan, often a percentage of the total loan amount. 
• Prepayment penalties: Amount charged by some lenders if you pay off all or part of your loan early. (Upgrade does not charge prepayment penalties or fees.)
• Late fees: Amount charged by some lenders if you’re not able to make your loan payment by its due date.

Additional Considerations

Beyond rates, consider comparing:

• Approval timelines (same-day vs. multi-day)
• Digital tools (apps, online portals)
• Autopay discounts

How to Compare Auto Loan Lenders Step-by-Step

Step 1: Check Your Credit Score

Knowing your credit score helps set realistic expectations for offers. Typically, the higher your credit score the better terms and rates you can receive.

Step 2: Get Pre-Qualified by Multiple Lenders

Request quotes from at least three types of lenders. For example, you can get quotes from a bank, credit union, and an online lender, like Upgrade.

Step 3: Compare APR and Total Loan Cost

Next, compare the APR of each quote. APR reveals the true cost of borrowing, including fees, so it’s more comprehensive than just the interest rate.

Step 4: Review Monthly Payments vs. Long-Term Interest

A lower monthly payment isn’t always better. Longer loan terms can mean paying more in total interest over the life of your loan.

Step 5: Negotiate and Leverage Competing Offers

Use one lender’s offer as leverage with another. Many are willing to match or beat competitors.

Practical Tips for Loan Shopping

Taking time to compare offers, understand interest rates, and evaluate total loan costs can help you avoid surprises and make a more confident financial decision. Whether you're buying new, used, or refinancing, smart preparation can save you money over the life of your loan. Use these additional tips to make your auto loan shopping experience a successful one. 

• Apply within a short window: Multiple applications within 14–30 days usually count as one credit inquiry.
• Negotiate with confidence: Use preapproval offers as leverage.
• Avoid overextending: Choose a loan term that balances affordable payments with reasonable total cost.

Final Thoughts

The lender you choose can make or break the affordability of your auto loan. By comparing offers side by side, weighing APRs, and considering the full picture (e.g. fees, terms, service), you can position yourself to save money and avoid surprises.

Before heading to the dealership, get pre-qualified and compare multiple offers. Explore auto financing through Upgrade options and ensure your financing supports your car purchase and long-term financial health. 

Auto refinance loans through Upgrade feature Annual Percentage Rates (APRs) of 5.54%-19.94%. Lowest rates require Autopay. The APR and other terms of your loan may vary and you may not be presented with multiple offers. If offered, your loan terms, including your rate, will depend on credit score, credit usage history, loan amount, and other factors. Late payments and other fees, as noted in your Borrower Agreement, may increase the cost of your fixed rate loan. Eligible vehicles must be 10 years old or newer and have less than 130,000 miles (or less than 150,000 for trucks).