Bank vs. Finance Company Auto Loans: Rate Comparison by Year

01 Introduction

When financing a new car, a buyer typically has two main options: a loan from a bank (or credit union), arranged independently of the dealership, or financing arranged through the dealership itself, usually via an auto finance company, including manufacturer-affiliated lenders. Which one is actually cheaper isn't fixed: the Federal Reserve has tracked both rates since the early 1970s, and the two have traded places repeatedly over more than five decades. This article compares average new car loan rates at banks versus finance companies for every year from 1972 through 2026, along with how much the average amount financed and average loan term have grown over the same period.

"Finance company" is the Federal Reserve's own term for this lender category, covering both manufacturer-affiliated auto finance arms and independent finance companies, as distinct from commercial banks and credit unions. The Fed revised its finance-company data collection methodology in 2008; this article uses the original series through 2007 and the continuing, methodologically updated series from 2008 onward, so the full 1972-2026 series reflects a consistent one-lender-type-per-year comparison rather than blending two different collection methods in the same year.

02 Rate, Amount & Term by Year

The table below compares the average 48-month new car loan rate at commercial banks to the average new car loan rate at finance companies, alongside the average amount financed and average loan term at finance companies, for every year from 1972 through 2026.

03 Which Is Cheaper: Banks or Finance Companies?

Neither lender type has a permanent rate advantage. Across the full 1972-2026 record, finance companies offered the cheaper average rate in 27 of 55 years, essentially a coin flip. What does show up clearly is that each side tends to hold an advantage for extended stretches rather than swapping year to year: finance companies were cheaper for 16 consecutive years from 1997 through 2012, the longest streak in the series, then banks generally held the edge through most of 2013-2020, and finance companies have been cheaper again for six straight years from 2021 through 2026, the second-longest streak on record.

04 Loan Amounts and Terms Have Grown Substantially

Independent of which lender type is cheaper, both the size and length of the average new car loan have grown enormously. The average amount financed for a new car loan at a finance company grew from $3,104 in 1972 to $42,504 in 2026, a 13.7-fold increase, while the average loan term grew from 35 months to 66 months over the same period, an increase of almost 32 months, or about two and a half years.

The extended loan term matters for shopping purposes beyond the interest rate itself: a longer term lowers the monthly payment for a given loan amount, but it also means paying interest over a longer span, so total interest paid can be higher even when the rate is similar or lower than a shorter-term alternative.

05 What This Means When Shopping for a Car Loan

Because the bank-versus-finance-company gap has swung by whole percentage points across multi-year stretches, and the current gap is wider than usual, a buyer who checks only one type of lender risks missing a meaningfully cheaper rate. The historically sound approach is to get a rate quote from both a bank (or credit union) and the dealership's finance company before signing, since which one is cheaper has changed direction more than once over the past five decades and shows no sign of being permanently settled in either direction.

06 Data Sources

1. Board of Governors of the Federal Reserve System: G.19 Consumer Credit statistical release, historical data files (commercial bank new car loan rates; finance company new car loan rates, amounts financed, and maturities). federalreserve.gov