Auto loan rates in Texas can vary depending on lenders. Issued by financial institutions like banks or credit unions, auto loans are an affordable way to finance vehicle purchases over a period of months or years. Before you begin shopping for a new or pre-owned sedan or SUV, make sure you’re aware of the state’s current auto loan rates. 

The average auto loan rate in Texas is about 5.27 percent, and state law forbids lenders from charging interest rates above 27 percent. Although state auto loan rates will vary depending on the lending institution, the borrower’s credit score and history will also impact the rate and loan term they receive. 

car salesman reviewing current auto loan rates in Texas with potential buyer

How to get the best interest rate

Getting pre-approved for a loan to buy a new or pre-owned vehicle can be an intimidating and confusing process, but it’s a great way for buyers to lock in better interest rates. Many consumers can’t afford to pay for vehicle purchases in a single lump sum, but low-interest auto loans issued by banks or credit unions like Texas Tech Credit Union can make vehicle ownership possible. 

Check your credit history

Before applying for a low-interest auto loan in Texas, make sure to check your credit score and history to identify any negative marks. Consumers are entitled to one free report each year from all three credit reporting bureaus — Experian, TransUnion, and Equifax. Take advantage of these reports, and look out for any errors or fraudulent activity that could hurt your chance of obtaining the best auto loan interest rate in Texas.

If your credit score is 600 or lower, consider spending anywhere from six months to a year working to improve it — this can help secure a better interest rate and terms. A poor credit score can be improved by certain credit-building activities, such as using a pre-authorized credit card for purchases, making payments on time, and sticking to a budget. 

Get a pre-approval 

Getting pre-approved for auto loans before shopping for vehicles can simplify the process by helping buyers negotiate better prices at dealerships or from private sellers.

It is worth considering a financial institution that offers quick pre-approval and low-interest rates. 

In addition to offering low-interest rates to members, borrowing from financial institutions can have numerous other benefits. Obtaining loans from credit unions can be more affordable and convenient than bank loans, and borrowers are also given access to ancillary products at low costs, such as extended warranties, multi-shield protection, credit life, and disability, or gap insurance. Many dealerships or traditional banks simply don’t offer these features, and if they do, they’re often much more expensive. 

Before signing for a loan

Before signing for an auto loan in Texas, read the loan terms carefully to make sure you understand the agreed-upon interest rate, fees, and charges that must be paid when purchasing a vehicle in the state of Texas. Decide how much you can pay upfront as a down payment, and make sure you’ve agreed to the annual percentage rate (APR) and specific loan terms, such as the length of the loan. The shorter the loan, the less overall interest paid. 

The following taxes and charges apply to the standard presumptive values of most vehicles purchased in the state of Texas, along with the agreed-upon interest rate. 

  • Title transfer fee: Can be $28 or $33 because the fee varies by county. 
  • Sales tax: Every car purchase comes with a state tax of 6.25 percent, according to the Texas Department of Motor Vehicles.
  • Use tax: Texans who purchase vehicles are also required to pay a use tax, which equals 6.25 percent of the sales tax. Any new or established resident using the vehicle for business must also pay this tax.
  • Tag and license fee: The base fee is $51.75, and the local fee is $10.
  • Transfer registration fee: Is typically $2.50.

How to get the best auto loan rate in Texas

Finding the lowest auto loan rate doesn’t have to be complicated. Texas Tech Credit Union offers financing for new and used vehicles with flexible terms and lengths, and our interest rates start as low as .99 percent. Contact us today to learn more. 

 

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