Ratings Methodology for
Direct Lender Auto Loans
Direct Lender Auto Loans
NerdWallet currently reviews and rates auto loan products in the following categories:
• Purchase (origination loans) for new and used vehicles
• Refinance loans
• Lease buyout loans
Data collection process
We survey 30 financial companies that offer any combination of new car purchase loans, used car purchase loans, auto refinance loans (traditional and/or cash-out) and lease buyout loans. These companies include direct lenders and aggregators. Aggregators don't have in-house loan products and match borrowers to a third-party lenders within a network.
The survey for direct lenders has different questions than the survey for aggregators, but both surveys include more than 60 data points. For example, some data points include pre-qualification with a soft credit check, the ease of the application process, the disclosure of a minimum credit score and income requirements, availability to borrowers in all states and level of customer service.
This process includes cross-checking company websites to confirm product details and following up with company representatives. At least two writers and an editor verify the facts for every lender review to ensure accuracy of data.
The survey for direct lenders has different questions than the survey for aggregators, but both surveys include more than 60 data points. For example, some data points include pre-qualification with a soft credit check, the ease of the application process, the disclosure of a minimum credit score and income requirements, availability to borrowers in all states and level of customer service.
This process includes cross-checking company websites to confirm product details and following up with company representatives. At least two writers and an editor verify the facts for every lender review to ensure accuracy of data.
Review and rating process
To receive a star rating, a lender must respond to NerdWallet’s annual auto loans survey.
Star ratings are assessed from poor (one star) to excellent (five stars) based on survey responses and are rounded to the nearest half-star.
NerdWallet’s overall ratings for direct lenders are weighted averages in four categories.
• Loan affordability (30%) includes competitive rates, origination fees and rate discounts for autopayments.
• Transparency/disclosures (25%) includes pre-qualification with soft credit checks, visibility of information such as rates, terms and minimum eligibility requirements and availability of FAQs.
• Loan requirements and flexibility (20%) includes choice of payment due date, ability to add co-applicants, loan availability by state and number of loan term options.
• Customer experience (25%) includes ease of the application process, customer support availability and financial education support, such as articles and tools.
Subcategories within categories vary slightly for purchase loans, refinance loans and lease buyout loans. For example, purchase loan flexibility includes restrictions on where a borrower can purchase a vehicle, while refinance loan flexibility considers limitations on how soon a borrower can refinance. For this reason, a lender can have different star ratings for different loan products.
A fifth category is unweighted and discretionary. A lender’s rating may be adjusted up or down based on the following:
• It has faced governmental regulatory action in the past two years for practices harmful to auto loan consumers.
• It offers a consumer-friendly feature (not scored in other categories) that other lenders do not offer.
• It has a unique aspect to the loan or servicing that would negatively impact the borrower.
• An example would be charging a prepayment penalty, when most lenders no longer do.
Star ratings are assessed from poor (one star) to excellent (five stars) based on survey responses and are rounded to the nearest half-star.
NerdWallet’s overall ratings for direct lenders are weighted averages in four categories.
• Loan affordability (30%) includes competitive rates, origination fees and rate discounts for autopayments.
• Transparency/disclosures (25%) includes pre-qualification with soft credit checks, visibility of information such as rates, terms and minimum eligibility requirements and availability of FAQs.
• Loan requirements and flexibility (20%) includes choice of payment due date, ability to add co-applicants, loan availability by state and number of loan term options.
• Customer experience (25%) includes ease of the application process, customer support availability and financial education support, such as articles and tools.
Subcategories within categories vary slightly for purchase loans, refinance loans and lease buyout loans. For example, purchase loan flexibility includes restrictions on where a borrower can purchase a vehicle, while refinance loan flexibility considers limitations on how soon a borrower can refinance. For this reason, a lender can have different star ratings for different loan products.
A fifth category is unweighted and discretionary. A lender’s rating may be adjusted up or down based on the following:
• It has faced governmental regulatory action in the past two years for practices harmful to auto loan consumers.
• It offers a consumer-friendly feature (not scored in other categories) that other lenders do not offer.
• It has a unique aspect to the loan or servicing that would negatively impact the borrower.
• An example would be charging a prepayment penalty, when most lenders no longer do.
Data accuracy
Auto loan reviews are thoroughly reassessed annually. Writers and editors also make updates to data such as rate changes, new features and star ratings throughout the year as necessary. We work to maintain contact with providers to keep information current.
The review team
The auto loans review team is made up of writers and editors who cover a wide range of auto industry topics. The auto loan team’s writers and editors combined have more than 30 years of experience in finance. Each team member adheres to NerdWallet’s strict guidelines for editorial integrity.
