Online car loans made by digital banks provide shoppers a quick and easy path to securing a loan for their next vehicle purchase. In the past, obtaining an auto loan often involved going directly to a brick-and-mortar bank to discuss loan rates and available terms. Likewise, many shoppers allow dealerships to arrange financing for them, with dealerships contacting third-party lenders who provide the loan while the dealership charges a fee for arranging the loan (process described below). Digital banks, on the other hand, eliminate the middleman - and the charge! - by providing loans directly to consumers as they begin their vehicle purchasing process.
Start your online auto application right away and receive your preapproval in moments. Applying takes just a few minutes!
Finding the best online auto loan
A great feature of online auto loans is that they allow shoppers to compare loan rates from a variety of sources. When you’re shopping for online car loans, it’s helpful to understand important terminology of what can be a complex process. APR stands for “Annual Percentage Rate.” This percentage is the annualized finance charge which includes the amount of interest that you pay over the life of the loan.
The interest rate you receive when applying will be based on several factors, including the requested loan amount and your credit score. Applicants with strong credit will likely receive more favorable rates, while those with outstanding debts and defaulted loans may receive higher rates. The length of the loan, or ‘term’, will also play a significant role, with longer loan periods resulting in lower monthly payments but a higher total amount of interest paid. If you’re curious about how interest rates are determined, read our article.
Why get pre-approved for an online auto loan?
Traditional thinking is that the easiest way to finance a car is to browse the inventory at your local dealership until you find something you like and then apply for financing at the dealership. But did you know that dealerships don’t always offer the best terms on car loans?
Dealerships don’t just make money on the cars they sell - they also make money on vehicle financing through a mechanism offered by many third-party auto lenders called “dealer reserve1" or “dealer participation.”
When you apply for a loan at a dealership, the car dealer typically sends your credit application to a third-party lender. The lender then returns a loan approval with the minimum rate at which they will finance your vehicle, but many dealerships won’t tell you the rate on the lender approval. Why wouldn’t the dealership let you know your approved rate? Dealers will often sell customers on a rate higher (typically around 2.5% higher2) than the approval rate provided by the lender. The difference between the approval rate and rate provided by the dealer would be kept as additional commission by the dealer.
Where to find an online car loan
Online car loans are available from a variety of sources. If you’re looking for an online car loan, you can search the following sources:
- Digital banks & credit unions – Online banking sources, like Nationwide’s, allow applicants to go straight to the source for their loan application - no middlemen or red tape. With a digital bank, your loan application and processing take place entirely online. You simply submit an application and are given a loan rate based generally on your credit history, loan amount, loan term and desired vehicle. Credit unions also offer several of the services that banks provide, extending credit to their customers. Credit unions, unlike banks, require that you be a member to do business, so an applicant would probably have to join a credit union to receive an offer.
- Dealership websites – While dealership financing typically takes place at the dealer facility, some larger dealerships may have sites that allow you to begin the financing procedure online. This, however, is rare, and you’ll probably only be able to receive an estimate, which may or may not be the actual APR you receive after negotiating at the dealership.
Online car loan preapproval
Nationwide offers auto loan preapproval before you begin shopping for a vehicle - helping you budget for your purchase and save time and money at the dealership.
Ready to apply? Get preapproved for a car loan online now.