Auto loans

Car loans are priced off different mechanics than mortgages - and the term you choose usually costs more than the rate you negotiate.

How auto rates are set

Auto lending is shorter and secured against a depreciating asset, so pricing keys off the prime rate and the lender's own funding costs rather than long-term Treasuries. Credit tier matters more here than in almost any other consumer product: the spread between the best and worst tiers is routinely several percentage points on the same car.

New, used, and refinance

• New cars generally price lowest - the collateral is worth the most and manufacturers subsidise financing to move inventory.
• Used cars carry higher rates because the collateral is older and its value harder to predict.
• Refinancing can help if your credit has improved since purchase, but check for prepayment terms first.

Term length is the hidden cost

Stretching a loan from 48 to 72 months lowers the monthly payment and raises the total cost substantially. Worse, long terms on a depreciating asset put many borrowers underwater - owing more than the car is worth - for years. Use the calculator to compare the total-paid figure across terms before you accept the lower payment.

Before you sign

Dealer financing is convenient and sometimes genuinely the cheapest option, particularly with manufacturer promotional rates. It is still worth getting a quote from a bank or credit union first, so you walk in knowing what independent pricing looks like.