Green Car Loans: How to Compare Green Loans for Cars

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January 27, 2012

Green car loans are available through the Fuel Smart Auto Loan program, and are the latest incentive to encourage individuals to purchase more fuel efficient cars, or cars that use alternative fuels.

Qualified Cars
The first thing you need to know is whether or not the car you are interested in purchasing qualifies under the program. Go to and look the car up. This website provides fuel economy information on all cars available in the United States. Only cars that have 30 mpg or better, or are hybrid or alternative fuel cars qualify. Greenhouse ratings of 7 or better are required, based on carbon dioxide emissions. A rating of 7 or higher means that less than 180 grams of carbon dioxide are emitted for every kilometer traveled (this converts to about 290 grams per mile).

Designations like Smart Way represent vehicle that may be eligible for some green loans. Read up on this designation at sites like Go Green Blog Spot, to see what kinds of vehicles are eligible for certain incentives.

Compare Loans
If the car you want to purchase qualifies, the best place to compare green car loans is through applying with an online car loan clearinghouse, or with several different lenders. One loan clearinghouse that specifically advertises this kind of loan is Rapid Car Loans. However, the loan program is not limited to any specific lender or dealership, so you can approach any lender and ask about their program. Under the terms of the program, a discount of .30 percent is applied to the car loan rate.

You will receive multiple offers from lenders, usually via email or the telephone. Make sure to ask about the Fuel Smart Auto Loan program. Compare the length of the loan, the new car loan interest rate, the monthly payment amount and anything that might be included in the loan (insurance, fees, annual registration, etc).

Standard Loan Requirements
In order to get a green car loan, you need to meet the requirements that would be imposed for a standard loan. This means, at minimum, you need proof of residence and proof of income. Utility bills and pay stubs are usually sufficient for this purpose. Different lenders may have different requirements for minimum income, but you can safely assume that the absolute bare minimum is $1000 per month. There will likely be more basic requirements which may vary by lender, so contact your lender of choice to get a list of the information you need to supply.

Take a Look at Market Trends for Green Car Loans
You'll also want to know what the greater market is doing in regards to promoting ecological driving choices. Sites like Greener Cars will give you this kind of information.

Benefits of Green Car Loans

In order to provide incentive, these green loan programs come with many different benefits to make them more desirable than other auto loans.

Fewer Fees
Green car loans are entirely exempt from some fees that would be present on regular loans, such as monthly paperwork fees or an early repayment penalty. Other fees, such as late payment penalties, may be reduced as well, to save you even more money on top of the low interest rate.

Fixed, Automatic Repayments
Green car loans may be more convenient to repay than other loans, because they come with fixed payments. This makes it easier to budget in advance, and also means that you won't be surprised by a bill that costs more than you'd anticipated. For further convenience, you may be able to have payments automatically charged straight to your credit card, to save you the time and effort of writing and sending a check every month--and thanks to the benefit described above, you won't be charged extra for this service.

Flexible Options
Depending on your financial situation and personal preference, you may find it better to make a lump payment every month, or break it up into smaller, weekly or bi-weekly payments. With the flexibility offered by green car loans, you have your choice of any of the above when it comes to the frequency of payments. You can also get extended loan terms to minimize your payments, or pay extra on each bill to repay your loan early without fear of penalty.

Dangers of Green Car Loans

While these positive aspects shouldn't be ignored, they should be approached with caution.

Encourages Spontaneity
If you become caught up in the excitement of getting a great deal on a loan, you may end up buying a car you don't need or even particularly want, just to take advantage of the loan deals. If you aren't already in the market for a new car, you shouldn't buy a new one based solely on the loan you may be able to get.

Strict Limitations
Green car loans are only available on specific vehicles. In order to qualify, you need to be purchasing a hybrid vehicle with a greenhouse rating of 7 or more and that is less than 2 years old. If you were intending to purchase a car which fits this description regardless of loan offers, there's no problem. However, if you are in the market for a different sort of car, the incentive of green car loans may encourage you to change your mind for the wrong reasons and purchase a car you aren't fully happy with.

It's Still a Loan
While a better deal than most other loans, green car loans are still just that: loans. You'll still be paying interest, and will still be subject to penalty fees should your payments be late. If you don't have the financial means to repay the green car loan as you would any other, your credit will be negatively affected. It's important to remember that the negative aspects of other loans apply to green car loans.

Bad Credit Car Loans
One of the advantages of a green car loan is that it can be applied for no matter what your credit history is. As a result, the discount on the monthly loan payment can prove to be very helpful. The Fuel Smart Auto Loan can be applied regardless of where the borrower initiates their auto loan. In many cases, a private auto loan through a bank, credit union or online lender is the loan of choice for individuals with bad credit. Private loans are usually for amounts no higher than $30,000, which may eliminate the purchase of a luxury car. However, private loans are also available for used car purchases. It is possible to find used car loans for relatively new cars that still qualify under the requirements of the Fuel Smart Auto Loan program.

The Fuel Smart Auto Loan program is an excellent option for individuals who are considering purchasing a fuel efficient car or a hybrid car.

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