In early August 2021, President Biden signed an executive order stipulating that half of all new vehicles sold in the United States should be electric by 2030. So now might be the perfect time to get behind the wheel of one. green vehicle. If you’re buying an electric car, you may be able to save money by looking for a green car loan.
A green auto loan is a type of auto loan designed for zero-emission vehicles, often featuring lower interest rates or other benefits. Here’s what you need to know about this unique financing option.
What are green auto loans
A green car loan is a vehicle financing option that is available for environmentally friendly cars – or cars with lower average emissions. These fuel-efficient cars generally fall into the hybrid or electric category and are available from a variety of manufacturers, from Ford to Nissan to Tesla.
Green car loans entice buyers to consider these green vehicles by offering interest rate discounts, extended repayment terms and other benefits. In doing so, these loans make green vehicles more affordable for borrowers.
How do green loans differ from traditional car loans?
A green car loan is functionally similar to a traditional car loan: you apply for the loan through a lender, receive an interest rate based on your credit score, select a repayment term, and make regular payments with interest for the life of the loan. However, the details of the two loans may be slightly different.
Green car loans generally offer lower interest rates than conventional car loans, which can take the form of lower base interest rates or rate reductions. Because green vehicles can be expensive, many lenders also offer longer repayment terms than with conventional auto loans to lower the monthly payment.
One of the biggest determining factors of green auto loans is where you will apply for them. Unlike typical auto loans, which you can get from banks and online lenders, you’re more likely to find a green auto loan through a local credit union. The University of Hawaii’s Federal Credit Union, Vermont State Employees Credit Union, and Verity Credit Union are all examples of credit unions that offer green auto loans.
What is a green car?
A green car is a vehicle that is better for the environment than vehicles that run on gasoline or diesel. Typically, green cars use alternative fuels or electricity.
The best green vehicles have a smart way designation, a score assigned by the United States Environmental Protection Agency to the least emitting vehicles for each model year. Many lenders use this designation as a measure to determine if your car qualifies for a green auto loan at lower rates.
Why are green auto loans important in 2022?
Green vehicles and green car loans began to gain popularity in the early to mid-2000s, and they are becoming even more common. Soaring gasoline prices are also fueling demand, with the price per gallon in March averaging around $4.25.
According to Argonne National LaboratoryAmericans purchased a record number of hybrid and plug-in vehicles in February 2022, with hybrid purchases up 10.2% from February 2021 and plug-in purchases up 11.7%.
The Biden administration has also pledged to make green vehicles more accessible. In early August 2021, Biden signed an executive order calling for half of new auto sales to be zero emissions by 2030. Automakers pledge to help; Ford, General Motors and Stellantis (which owns Chrysler and Fiat) have pledged to increase production of electric vehicles to help meet the 2030 goal.
Green vehicles have many benefits, including lower carbon dioxide emissions, less maintenance, fewer fuel stops and quieter engines. Green vehicles still have a higher upfront price than traditional car options, but many states encourage drivers to purchase these vehicles by offering tax credits, and driving an environmentally friendly vehicle will help you save more money over time on general running costs. In addition, increased demand for vehicles will eventually drive down the price for future buyers.
Next steps and where to apply for a green auto loan
When applying for a green auto loan, first make sure your finances are in the best possible shape. It is always wise to work to improve your credit scoresince lenders use your credit score, income and more to determine if you qualify for a loan and what rates they can offer you.
From there, you can shop around for your green auto loan. It’s usually best to get a few quotes before signing up, as each lender offers different rates. There are several resources that can help you when you start car buying process:
- Plugstar: Star Plug is a great resource for car buyers early in the process. After entering your zip code and desired make and model, you’ll see cost estimates, available incentives, local dealership information, and the vehicle’s environmental footprint.
- EV lifespan: EV Life’s EV Climate Loan allows you to be prequalified with multiple lenders and automatically qualifies you for discounts and incentives, applying those savings upfront to your monthly payment.
- Bank of America: Bank of America offers financing for electric vehicles. You can apply online, get a decision in just 60 seconds, and lock in your rate for up to 30 days.
- Credit unions: Local credit unions are one of the best places to start your search for a green auto loan. Credit unions like JetStream Federal Credit Union, Suncoast Credit Union, and MyPoint Credit Union offer interest rate discounts on auto loans for green vehicles. When shopping for a car loan, ask your credit union about the options available.
The bottom line
A new vehicle is a big financial and emotional choice, but buying an eco-friendly vehicle can pay off in many ways. When choosing a new green car, ask all potential car loan lenders about their incentives or discounts; Getting a discount on a green car loan could save you hundreds or thousands of dollars over the life of your loan.