Looking to finance an EV or a clean car? Green auto loans can help you buy the energy-efficient car you’ve always wanted! Here’s everything you need to know.
With most countries looking to become zero-emission in the coming decades, there has been a spurt in the adoption of fuel-efficient cars worldwide. It is expected that by 2040, almost half of all vehicles in the US will be electric or fuel-efficient. Besides being environment-friendly, there are many incentives to buy a ‘green’ car. Easy financing is on top of that list!
Green auto loans are a tailored product for customers looking to buy greener, environment-friendly cars. Here’s everything you need to know about them!
What Are Green Auto Loans?
Green Auto Loans are used for the purchase of eco-friendly, energy-efficient, and alternative energy vehicles. Banks, credit unions, and other financial institutions offer green auto loans with lower interest rates, longer-than-average loan terms, and additional discounts to incentivize customers to buy ‘green’ vehicles.
How Do Green Auto Loans Differ from Regular Auto Loans?
Since green vehicles are priced slightly higher than regular cars, financing can be an issue for customers. To incentivize them, green auto loans offer the following benefits (varies according to the lender):
- Lower interest rates than regular auto loans – at least 1% discount
- Pre-approval for EV, hybrid, and alternative vehicle financing
- High loan amounts covered
- The loan amount may include taxes, license and registration fees, GAP insurance, and more benefits not usually added in regular auto loans
- Longer loan terms – up to 84 months – to reduce the monthly payments
- Fixed APRs based on the applicant’s credit score
- Additional discounts if you choose paperless billing
What Vehicles Qualify to Be Green Cars?
Any vehicle that runs on electricity (either fully or partially), uses an alternative source of energy (biofuel, CNG, hydrogen fuel cells), or has lower carbon emissions than average qualifies as a green vehicle. Ideally, they should not run on ‘dirty fuels’ like gasoline or diesel – but hybrid cars that partially run on gasoline can still qualify as green vehicles.
Many lenders use the SmartWay certification awarded by the Environmental Protection Agency (EPA) to check whether you qualify for EV auto loans.
Courtesy: The United States Environmental Protection Agency
Why Are Green Auto Loans Becoming More Important?
The past few years have been a killer on auto finances, with gas prices rising through the roof and new cars being costlier than ever. According to the American Automobile Association, the current average gas price in the US is $4.11, up from $2.32 just two years ago! As a result, with conventional fuel sources becoming costlier, 56% of Americans are driving less.
More than 25% of those surveyed said that it’s ‘very likely’ that they’ll buy an EV or energy-efficient vehicle in the future. This means that green cars need more affordable financing to incentivize people to buy them.
Can You Get Tax Credits for Buying a Green Car or Electric Vehicle?
Yes, since 2010, the US government has incentivized new electric vehicle purchases with a tax credit of up to $7,500. You can subtract a certain predetermined amount from the total income tax you owe at the end of a financial year. All EVs and PHEVs manufactured by designated auto companies are eligible for this tax credit.
How to Apply for a Green Auto Loan
- Ensure you have a good credit score before applying. This will help you get lower rates and more discounts for green auto loans.
- Rather than heading to banks, it’s best to try private lenders or credit unions that offer green auto loans
- Some good private lenders include Lightstream, RateGenius, Autopay, and Caribou
- Credit Unions like Verity Credit Union and Vermont State Employees Credit Union also offer green auto loans.
- Always shop around for good deals using a finance platform like Way.com. It’ll help you compare deals before deciding on one.
Can I Refinance My Current Green Auto Loan?
Yes, you can find several lenders willing to refinance your existing green auto loan. To get the best deal, try out an online refinance platform like Way.com. It will help you find pre-approved offers from multiple lenders, so you can choose the one that fits your budget!
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