The best auto loans of 2020, whether you're buying or refinancing

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Looking for an auto loan? These lenders are the best for 2020.

Here are the lenders offering the best car loans of 2020:

• Best auto loan overall: Bank of America
• Best auto loan for excellent credit: LightStream
• Best auto loan for bad credit: Capital One
• Best auto loan for refinancing: Clearlane by Ally Bank
• Best auto loan for lease buyouts: Bank of America

Check out these auto loan offers from our partners:

When it comes to car shopping, finding the right loan can be just as important as finding the right car.

It's not as easy as simply showing up to the dealership. To get the lowest interest rate, you'll want to shop around for an auto loan to see what kind of financing is available to you. Dealerships often mark up the interest rates on loan offers from lenders, and that can leave you paying more for the same car.

The good news is that it's completely avoidable if you're willing to shop around for your loan and get pre-approved before you start shopping at the dealership. To shop for the best rate, you'll want to look at several different lenders and see what each will offer you. Once you start getting rate quotes, you'll have two weeks to gather all the quotes you'd like without multiple inquiries hurting your credit score - the credit reporting bureaus count all of those inquiries as one within that period.

Having a pre-approval for a car loan can give you better bargaining power and peace of mind that you'll have the lowest interest rate possible. As you start shopping, keep in mind that your local small bank or credit union could also be a great place to get a loan - these institutions often offer lower car loan interest rates than big banks, but are usually limited to a relatively small geographic area.

Here are a few banks to help you start your search for a variety of situations.

Best auto loan overall: Bank of America

• Interest rates: as low as 2.74% for a new car purchase loan
• Available in all 50 states

Bank of America has excellent rates for auto loans currently, offering the lowest starting interest rates going into 2020. Rates for a new car purchase start as low as 2.74% APR, and a used car could be as low as 3.04% APR. With other similarly large banks large banks like Chase starting their auto loan rates around 4%, Bank of America's rates are beating out the rest. Bank of America also offers rate discounts for current customers, up to .5%.

Best auto loan for excellent credit: LightStream

• Interest rate range: 3.99% to 8.34%
• Minimum FICO score requirement: 66o
• Available in all 50 states

If you have a good or excellent credit score, you might want to consider LightStream in addition to Bank of America. A part of SunTrust Bank, Lightstream focuses on auto loans to customers with good or better credit, but does offer loans in all 50 states. Because it focuses on a narrow subset of customers, its rates don't go too high - NerdWallet reports that interest rates range from 3.99% to 8.34%. Experian data from Q3 2019 shows the average loan interest rate at 4.19% for borrowers with credit scores above 780 buying new vehicles, and LightStream beats the average.

Best auto loan for bad credit: Capital One

• Interest rate range: 4.53% to 12.55%
• Minimum FICO requirement: 500
• Available in the contiguous 48 states

Capital One offers easy and reputable auto loans for borrowers with credit scores of 500 or higher. The typical buyer in this credit range will see loan offers with 16.78% APRs, according to Experian - a rate which could quickly increase the cost of buying a car. Capital One offers rates lower than this, offering interest rates of 12.55% for used car loans up to 60 months for borrowers with with bad credit, according to research by MagnifyMoney. Capital One offers loans as small as $4,000 for used vehicles, meaning that you won't need to buy more car than you need in order to get financing.

Best auto loan for refinancing: Clearlane by Ally Bank

• Interest rates: 3.99% to 10.24%
• Minimum FICO requirement: 600
• Car must have fewer than 100,000 miles and be less than 10 years old
• Only offers loans for refinance and lease buyouts.

Online bank Ally doesn't offer financing to purchase a car. But, if you're looking to refinance the car you already have, its auto lending division Clearlane offers some competitive rates. As long as your vehicle meet the standards (less than 100,000 miles, and fewer than 10 years old), this lender could offer a competitive rate as low as 3.99%. Clearlane also offers auto lease buyouts.

Best auto loan for lease buyouts: Bank of America

• Interest rates starting at 3.84%
• Also offers purchase loans in addition to lease buyouts

If you're interested in buying the car you're currently leasing but need a loan to do so, Bank of America offers a loan for that. Bank of America offers a variety of auto loans, and like the others, its interest rates are competitive in 2020. Lease buyouts can have higher interest rates than a new or used car loan, but Bank of America's lease buyout APRs start lower than the rates other lenders offer.

Check out these auto loan offers from our partners:

Frequently Asked Questions

How were these winners determined?

These lenders were chosen based on interest rate (APR) for each of the conditions above, including credit score, whether you're buying new or used, and loans for a specific need like refinancing or lease buyouts. Business Insider gathered data from NerdWallet, MagnifyMoney, and Credit Karma, and from the lenders themselves. This list only considers loans that were available in most of the US, and does not include captive lenders - lenders owned by auto companies.

The dealership I'm shopping at offers financing. Should I just use that?

Car dealerships are allowed to mark up interest rates on auto loans that they offer, and generally, they do. The interest rate a salesperson offers often includes a cut for the dealership, resulting in a higher interest rate for you. While you might qualify for an interest rate of 6% from a bank, you might see 6.5% or even 7% from a dealership, for example.

If you're willing to put some work in, you may be able to save by shopping around on your own. The best way to avoid this issue is to get pre-approved by a few banks or lenders as you start car shopping, and take those pre-approvals to the dealership with you. Then, you'll have a few estimates on what your cost to borrow could be, and can comparison shop for the lowest APR.

How long is too long for an auto loan term?

The longer the loan, the lower the payment. But, paying for longer than 60 months (five years) on your auto loan could leave you owing more than your car is worth.

Cars depreciate quickly, and if you're paying for more than five years on an auto loan, your loan could end up in this situation, also called being "upside-down." In Q3 2019, 61.9% of used car buyers and 71.9% of new car buyers took out a loan with a term between 61 and 84 months according to Experian data, and it's turning into a problem. As auto loans increase in length, auto loan delinquencies are on the rise, too.

Getting an auto loan with bad credit? Here's what you need to know.

If you're shopping for a car loan with bad credit, you could benefit a lot by doing your research and shopping around when looking for an auto loan. Avoid any "buy here, pay here" financing, as these loans often come with exorbitant interest rates and high monthly payments. According to data from the National Independent Automobile Dealers Association, "buy here, pay here" dealers saw an average default rate of about 35% in 2019.

A local credit union might be a good place to start if you have a bad credit score - sometimes lenders like these can be more forgiving and offer lower interest rates than big banks.

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