Quick answer
An auto loan is secured by the car you buy, so the lender can repossess it if you don't pay. A personal loan is usually unsecured, which can mean a higher APR but no lien on the car. The CFPB says dealer-arranged rates are negotiable and may be higher than the rate a lender offered the dealer.
Either can pay for a car. The question is what you put at risk and what you pay for the money.
Side by side
| Auto loan | Personal loan | |
|---|---|---|
| Collateral | The car | Usually none |
| If you stop paying | The car can be repossessed | Collections and credit damage |
| Where to get it | Banks, credit unions, finance companies, or through the dealer | Banks, credit unions, online lenders |
| Use of funds | The vehicle | Any purpose, including private-party sales |
How the rate changes the cost
| $20,000 over 60 months | Monthly payment | Total interest |
|---|---|---|
| 8.99% APR | about $415.07 | about $4,904 |
| 15.99% APR | about $486.25 | about $9,175 |
Arithmetic illustration, not an offer. A 7-point difference costs about $4,271 more over the loan.
Dealer financing: negotiate
The CFPB says when you finance through a dealer, lenders propose a "buy rate" to the dealer, and the dealer may charge you more. The rate is negotiable like the price. Shop banks and credit unions first.
When a personal loan can make sense
- A private-party sale or an older car, if your auto loan offers are limited.
- You want to own the car free of a lien.
- The personal loan's total cost is competitive with the auto loan offers you have.
Want to compare real offers? Use the form on this page to see whether partner lenders may have an installment loan for you, with APRs on our network from 5.99% to 35.99%, or call (800) 236-7761.
Examples are illustrations, not offers. Approval, APR and terms depend on the lender, your state and your credit profile.
Frequently asked questions about personal loan vs auto loan for buying a car
Is it better to buy a car with a personal loan or an auto loan?
Compare the APRs you are offered: an auto loan is secured by the car, while a personal loan usually is not. A personal loan may suit a private sale or if you want no lien. Compare APR and total cost.
Can I negotiate the rate on dealer financing?
Yes. The CFPB says the interest rate is negotiable, and dealers might not offer you the best rate you qualify for.
Can a lender repossess a car bought with a personal loan?
An unsecured personal loan has no lien on the car. Missing payments still leads to collections and credit damage.
Should I get preapproved before visiting a dealer?
It helps. Having an offer from a bank or credit union gives you a rate to compare against dealer financing.
Sources
- CFPB: Auto loans (accessed 2026-10-09)
- CFPB: Can I negotiate a car loan interest rate with the dealer? (accessed 2026-10-09)
- CFPB: What should I do if I can't make my car payments? (accessed 2026-10-09)
Last updated 2026-10-09. How we research and update pages.