Study: The 10 Best States for Financing a New Car

Posted in Auto Loans • August 19, 2013

Interest rates may be on the rise, but car buyers continue to enjoy some of the lowest financing options available. In fact, using our extensive rate database, we performed a survey of current auto loan rates to determine whether borrowers’ geography makes a difference in the rate they can expect to receive.

To find out, we aggregated base interest rates on every new car loan product in the U.S., then averaged them all by state to come up with a top 10 ranking of the states with lowest rates overall. Additionally, we identified the financial institutions in each state providing the lowest interest rate for a handful of common loan terms.

See the findings below and find out where it’s most affordable to finance a vehicle today.

(click thumbnail to see average rates in all states)

new car loan rates

10 States with the Lowest Auto Loan Rates Overall

1. Michigan: 3.03%

The state known for its booming auto industry tops our list with the lowest aggregate average loan rate on new cars at 3.03%. Credit unions dominate for lowest rates offered, with a different financial not-for-profit coming in first across three popular loan terms.

Best Local Auto Loan Rates for Popular Terms

  • 36-month: Community West Credit Union – 1.49%
  • 48-month: Navy Federal Credit Union – 1.49%
  • 60-month: Michigan Educational Credit Union – 1.75%

State Demographics

Population: 9,883,360
Number of Registered Autos: 5,084,005
Per Capita Personal Income: $37,497
Unemployment Rate: 8.7%

2. Oregon 3.04%

Oregon takes second place, with it’s local First Community Credit Union offering local residents some of the lowest auto loan rates available in the country.

  • 36-month: First Community Credit Union – 0.99%
  • 48-month: USAA FSB – 2.24%
  • 60-month: First Community Credit Union – 1.49%

Population: 3,899,353
Number of Registered Autos: 1,457,239
Per Capita Personal Income: $38,786
Unemployment Rate: 7.9%

3. Alaska 3.04%

Military financial institutions provide the lowest auto loan rates in Alaska, which ranked third overall.

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: USAA FSB – 2.24%
  • 60-month: Navy Federal Credit Union – 1.79%

Population: 731,449
Number of Registered Autos: 225,656
Per Capita Personal Income: $46,778
Unemployment Rate: 6.1%

4. New Hampshire 3.08%

In fourth place is New Hampshire, and it’s own local New Hampshire Federal Credit Union consistently provides the lowest rates in the state for new cars.

  • 36-month: New Hampshire FCU – 1.37%
  • 48-month: New Hampshire FCU – 1.37%
  • 60-month: New Hampshire FCU – 1.37%

Population: 1,320,718
Number of Registered Autos: 614,113
Per Capita Personal Income: $47,058
Unemployment Rate: 5.2%

5. South Carolina 3.15%

Navy FCU and USAA once again take the top spots in new car loan rates for 36-, 48- and 60-month terms in our number five state, South Carolina.

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: USAA FSB – 2.24%
  • 60-month: Navy Federal Credit Union – 1.79%

Population: 4,723,723
Number of Registered Autos: 2,018,612
Per Capita Personal Income: $34,266
Unemployment Rate: 5.2%

6. Vermont: 3.17%

At number six, average rates in Vermont are just a hair behind South Carolina and the state shares the same institutions offering the lowest rates overall.

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: USAA FSB – 2.24%
  • 60-month: Navy Federal Credit Union – 1.79%

Population: 626,011
Number of Registered Autos: 289,738
Per Capita Personal Income: $42,994
Unemployment Rate: 4.4%

7. Oklahoma: 3.23%

Oklahoma ranks number seven for the lowest average auto loan rates — and once again, Navy Federal Credit Union and USAA are the institutions providing borrowers with the most competitive base rates.

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: USAA FSB – 2.24%
  • 60-month: Navy Federal Credit Union – 1.79%

Population: 3,814,820
Number of Registered Autos: 1,567,629
Per Capita Personal Income: $39,006
Unemployment Rate: 5.2%

8. Utah: 3.28%

Chris Miles, Utah resident and cash flow expert and creator of MoneyRipples.com, offers insight as to why his home state may have made it to the top 10, explaining, “In Utah, we have some of the strongest employment numbers and a lot of projected economic growth that would lower banks’ risk in lending. Furthermore, they may be encouraging lending since I know many people were affected during the last recession and stopped applying for loans…some of the lowest rates nationwide are in states where they may be trying to stimulate the economy more by encouraging lending.”

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: USAA FSB – 2.24%
  • 60-month: Navy Federal Credit Union – 1.79%

Population: 2,855,287
Number of Registered Autos: 1,304,594
Per Capita Personal Income: $34,601
Unemployment Rate: 4.7%

9. Washington: 3.29%

At number nine, Washington helps put the entire U.S. west coast in the top 10 with an aggregate average rate on new car loans of 3.29%.

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: Global Credit Union – 1.75%
  • 60-month: Global Credit Union – 1.75%

Population: 6,897,012
Number of Registered Autos: 2,578,732
Per Capita Personal Income: $45,413
Unemployment Rate: 6.8%

10. North Carolina: 3.31%

North Carolina rounds out the top 10; local resident and founder of MoneyQandA.com, Hank Coleman, offered some final insight into why these states ranked highest. Coleman explained, “Consumers see different car loan interest rates between states due to many different factors; when residents of certain states are generally riskier borrowers than others, local governments require different fees on loans, and regional programs that local banks offer their customers in an effort to keep their loan business at home instead of losing it to national banking chains.”

  • 36-month: Navy Federal Credit Union – 1.49%
  • 48-month: Truliant Federal CU – 1.99%
  • 60-month: Navy Federal Credit Union – 1.79%

Population: 9,752,073
Number of Registered Autos: 3,249,804
Per Capita Personal Income: $37,049
Unemployment Rate: 8.8%

Advice for Local Car Buyers

While this data shows the above states offer an overall more friendly lending environment to residents, potential car buyers shouldn’t be alarmed if their states rank near the bottom. When it comes to affordable financing, there are always great options available on the local level, and it’s up to the borrower to find them.

“Don’t rely on dealers to find the best interest rate for you,” advised Christian Gulliksen, senior automotive editor for CarsDirect, an online car buying service specializing in new cars. “The rate a dealer presents may not be the rate a bank offered – dealers often add a point or two and pocket the difference as profit. This is why you should always arrange a good loan offer before going to the dealership. If the dealer can beat it, great. But either way, you’re not paying interest you don’t have to pay,” he said

Additionally, car buyers shouldn’t expect to see interest rates on car loans stay this low for too long. Financial journalist, Chad Fisher, told us that new auto sales dropped precipitously following the Great Recession in 2006, “the silver lining being that interest rates plummeted, allowing people to borrow money for a new car at a much lower interest rate.” However, Fisher added, “In 2013 auto interest rates are still low, but look for them to continue to move up as the Federal Reserve looks to tighten up the money supply in 2014 or 2015.”

Methodology

Auto loan rate data was compiled using the GoBankingRates interest rate database. GoBankingRates partners with Informa Research Services, Inc. (www.informars.com) in aggregating up-to-date rate information belonging to thousands of local, national and online U.S. banks and credit unions. Although the information has been obtained from the various financial institutions, the accuracy cannot be guaranteed.

This study examined base interest rates offered by financial institutions on all new car loan products, using a state-wide average of these rates to determine ranking. Demographic data is supplied for reference only and was not considered in determining state rankings.

Auto loan rates are as of July 24, 2013 and are subject to change at any time at the discretion of individual institutions. Rates may have changed since this date.

Additional Data Sources

  • Population data based on U.S. Census Bureau 2012 estimates.
  • Vehicle Registration according to U.S. Department of Transportation, Federal Highway Administration, Highway Statistics 2010, MV-1 and MV-9, available at http://www.fhwa.dot.gov/policyinformation/statistics.cfm as of March 16, 2012.
  • Income data as of 2012 via the Bureau of Business and Economic Research.
  • Unemployment rates according to Bureau of Labor Statistics, Seasonally Adjusted for June 2013.
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Best Auto Loan Rates

Institution
Best Rate (APY)
SCE Federal Credit Union
0.75%
1 Year New Auto Loan
Nymeo FCU
0.99%
1 Year New Auto Loan
Self Reliance FCU
0.99%
2 Year New Auto Loan
Rates are current up to 30 days, verify rate through institution site. Data compiled from the GoBankingRates.com interest rate database and Informa Research Services, Inc. The accuracy cannot be guaranteed.
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