The Open Road Awaits: Your Guide to Subaru Loans

Subaru is a Japanese automobile manufacturer that has been selling cars in the United States since 1968. The company is known for its all-wheel drive vehicles and for sponsoring outdoor adventures.

When it comes to financing a new Subaru, customers have several options to choose from. Subaru offers financing through Subaru Motors Finance (SMF), which is the captive finance company for Subaru in the US. SMF works with dealers to provide financing solutions to Subaru customers including loans and leasing options.

The financing process when buying a Subaru starts with the customer applying for financing through the Subaru dealer. The dealer will collect information on income, employment, and credit history and submit a credit application to SMF on the customer’s behalf. SMF will review the application and make a determination on loan approval and interest rates.

If approved, SMF will provide the loan terms to the dealer, who will then work with the customer on finalizing the sale. The customer will need to agree to the interest rate, down payment, and monthly payment terms of the loan before driving home their new Subaru.

Financing with Subaru provides customers with competitive interest rates and flexible terms for purchasing new Subaru vehicles. With loan options, leasing, and financing specials, Subaru aims to make owning their vehicles accessible.

Types of Loans

When financing a Subaru vehicle, you have several options to consider:

New vs. Used Vehicle Loans

Subaru offers financing for both new and used vehicles. New vehicle loans typically have lower interest rates and allow you to take advantage of current promotions and incentives. Used vehicle loans have slightly higher rates but enable you to get a Subaru model that’s a few years old at a lower price point.

Lease vs. Finance

You can choose to lease a Subaru for a fixed term of 2-3 years rather than finance the entire purchase price. Leasing offers lower monthly payments but you won’t own the vehicle at the end of the lease. Financing results in higher monthly payments but you own the Subaru once it’s paid off.

Promotional Financing Offers

Subaru frequently offers special financing promotions, especially on new models. These can include reduced APRs, no interest for a period of time, or deferred first payments. It’s worth checking for current offers that can make financing more affordable. Limited-time promotions may apply for specific models, trim levels, or lease terms.

Interest Rates

When financing a new Subaru, interest rates can vary quite a bit depending on your credit score, loan term, down payment, and other factors. Here’s what to know about average interest rates and how to get the best deal:

The average interest rate for Subaru loans is around 4-7%, though rates can range from 0% for top-tier credit on certain models to over 10% for buyers with poor credit. Rates are set by Subaru Financial Services as well as outside lenders like banks and credit unions.

The main factors that impact your interest rate are:

  • Credit score – The higher your score, the lower the rate since you’re seen as less risky. Aim for a score over 720.
  • Down payment – The more you put down, the lower the rate since you’re financing less. 20% or more is ideal.
  • Loan term – Shorter terms usually have lower rates. Stick to 36-60 months.
  • New vs used – New cars tend to have better rates and incentives.
  • Model – Low-demand models may offer lower rates.

Strategies to get the best rate possible:

  • Shop lenders and compare rates. Credit unions often offer good deals.
  • Ask about promotions or discounted rates. Manufacturers sometimes run specials.
  • Improve your credit score before applying by paying down debts.
  • Put down 20% or more as a down payment if possible.
  • Opt for a shorter loan term like 36-48 months.
  • Consider a new versus used model.

By understanding the factors that determine your interest rate and taking steps to improve them, you can potentially save thousands over the life of your Subaru loan. Comparing loan offers is key to getting the lowest rate for your situation.

Down Payment

The down payment is the amount of cash you pay upfront when purchasing or leasing a new Subaru. The down payment reduces the amount you need to finance.

Subaru recommends a down payment of 10-20% of the vehicle’s purchase price if you’re financing. Putting down more money upfront will reduce your monthly payments and total interest charges over the loan term.

Many Subaru dealers offer down payment assistance programs to help make vehicles more affordable. These programs essentially provide a discount on the selling price, allowing you to put less money down while still getting a good deal.

For example, Subaru’s Customer Cash program offers $500-1500 off MSRP that can be applied to your down payment. There are often regional incentives and military discounts as well. Discuss available down payment assistance options with your Subaru dealer to lower your upfront costs.

With a lower down payment, expect to have higher monthly payments and more interest fees over the life of your loan. Carefully consider the tradeoffs based on your budget and financial situation. A larger down payment is recommended if you can afford it.

Loan Term

When financing a new Subaru, most buyers will take out a loan ranging from 36 to 72 months. The average loan term for a new Subaru is around 60 months, or 5 years.

Shorter loan terms of 3-4 years have some advantages. You’ll pay less interest over the life of the loan, and you’ll own the car free and clear more quickly. However, monthly payments will be higher.

Longer 6-7 year loans have lower monthly payments, but you’ll pay more in interest over time. There’s also a higher chance of the loan being underwater if you want to trade in or sell the vehicle before it’s paid off.

Overall, a 5 year loan strikes a good balance for most buyers. Payments are manageable, interest paid isn’t too high, and the loan is typically paid off right around the time the factory warranty expires. This allows you to sell or trade while the car still has value, without being burdened by remaining payments. When financing with Subaru, carefully consider your budget and ownership plans to choose the ideal loan term.

Credit Score

Your credit score is one of the most important factors lenders consider when approving auto loans. It gives them an indication of how reliably you have repaid debts in the past.

In general, the higher your credit score, the better the loan terms you can qualify for. Here are some key points on credit scores and auto loans with Subaru:

  • Subaru typically requires a minimum credit score of 620 for financing approval. Applicants with scores below this threshold may be required to have a co-signer or provide a larger down payment.

  • Interest rates are directly tied to credit scores. Borrowers with excellent credit in the 750-850 range will qualify for the lowest rates, while those with fair or poor credit will pay higher interest.

  • The maximum loan term may be restricted based on your credit score. Applicants with lower scores often have shorter maximum terms of 4-5 years, while those with great credit can qualify for 6-7 year loans.

  • Low credit scores can also mean higher down payment requirements. To get approved, you may need to put 10-20% or more down if you have past credit issues.

  • Special financing offers and incentives are generally reserved for customers with good or better credit, 720 and above. You usually need to meet a minimum score threshold to qualify.

Checking your credit reports and scores from all three bureaus before applying for an auto loan is highly recommended. This allows you to understand your starting position and gives you time to improve any issues which may be negatively impacting your score. A higher score can save you thousands over the life of your loan.


Co-signing a loan can be helpful if you have poor credit or limited credit history and don’t qualify for financing on your own. A co-signer with good credit can improve your chances of getting approved and can help you secure a lower interest rate.

When considering a co-signer, here are some key things to keep in mind:

  • Co-sign when you can’t qualify on your own: If your credit score is below 600, you’ll likely need a co-signer to get approved for financing. Even scores in the low 600s may require a co-signer to get the best rates.

  • Choose a co-signer with excellent credit: Your co-signer’s credit score, income, and debt-to-income ratio will factor into the loan decision and terms. Choose someone with a score over 700 to improve your chances.

  • Discuss expectations upfront: Make sure your co-signer understands they are equally responsible for making payments if you can’t. Set clear expectations about repayment.

  • Consider alternatives if possible: If you can wait and improve your credit, you may be able to qualify for financing on your own later and avoid putting responsibility on your co-signer.

Having a co-signer can make purchasing a Subaru more feasible, but only choose this option if absolutely necessary and with a responsible co-signer you trust. Make sure you fully understand the implications before moving forward.


Refinancing your Subaru loan can make sense in certain situations. Here’s what you need to know about refinancing a Subaru loan:

When to Consider Refinancing

The main reason to refinance your Subaru loan is to get a lower interest rate. Interest rates fluctuate over time, so if rates have dropped significantly since you took out your original loan, refinancing could lower your payments. Refinancing can also help if your credit score has improved – you may qualify for better loan terms.

It’s generally advisable to refinance if you can get at least 2 percentage points lower on your interest rate. This can result in significant savings over the life of the loan. You’ll also want to consider how long you have left on your current loan term. If you have several years left, refinancing is more likely to yield meaningful savings.

Refinancing can also allow you to change your loan term. You may want to shorten the term to pay off your loan faster, or lengthen it to lower your monthly payments. Evaluate whether the new term makes sense for your financial situation.

Refinancing Process

The process of refinancing your Subaru loan is similar to taking out a new auto loan:

  • Shop around and compare offers from banks, credit unions, and online lenders. Get pre-qualified to see estimated rates.

  • Submit a loan application with your chosen lender and provide required documentation like proof of income.

  • The lender will evaluate your creditworthiness and issue a new loan if approved.

  • Once approved, you’ll get new loan terms including the interest rate, monthly payment, and loan length.

  • After accepting the new loan, the lender will pay off your existing Subaru loan balance. Your old loan will be closed out.

  • You’ll begin making payments on the new, refinanced loan. Your monthly payments and interest rate should be lower if refinancing achieved your goals.

Be sure to read the fine print and understand any fees for refinancing. Also, check on whether your existing loan has a prepayment penalty. This could add cost when paying it off.

Refinancing can be a smart move to save on your Subaru loan, but make sure the numbers work out in your favor. Crunching the costs versus savings will tell you if it’s the right option.

Lease-End Options

When your lease term ends, you have a few options to consider:

Buying Out Your Lease

Many leases allow you to purchase the vehicle at lease-end. This is known as buying out your lease. The buyout price is usually stated in your original lease agreement. Buying out your lease can make sense if:

  • You want to keep driving the vehicle long-term
  • The vehicle has low mileage and is still in good condition
  • The buyout price is lower than the car’s market value

Buying out the lease transfers ownership to you. You won’t have to return the car or continue making payments.

Returning the Vehicle

If you don’t want to buy the car, you can return it to the dealer as stated in your lease agreement. Make sure the car is in good condition and doesn’t exceed the mileage limit. Extra wear or mileage over the limit results in fees.

Returning the leased vehicle ends your obligations. You won’t own the car anymore or have to make further lease payments. This option makes sense if you want a new vehicle after the lease term.

Lease Extension

Some leases allow you to extend your current lease for a short period, usually 6-12 months. This gives you more time to decide if you want to buy or return the car. Extensions may require an additional down payment and higher monthly payments.

Carefully compare all lease-end options. Crunching the numbers can help determine the most cost-effective choice before your lease term expires. Consider your budget, future vehicle needs, and the car’s condition.


Choosing the right financing option for your Subaru vehicle is an important decision. Here’s a quick summary of the key points covered in this guide:

  • Subaru offers standard auto loans as well as special financing deals through partnerships with lenders. Compare interest rates and terms to find the best offer.

  • The amount you put down and the length of the loan affect the monthly payment. Evaluate your budget to strike the right balance.

  • Your credit score plays a big role in determining loan approval and interest rates. Maintaining good credit can help you qualify for better financing.

  • Co-signing may help those with little credit history get approved. But co-signers share responsibility for the loan.

  • Refinancing or lease buyouts are options later on. Consider when rates drop or you want to purchase your leased vehicle.

For more help evaluating Subaru finance options, visit their financing page. You can build and compare personalized payment estimates. Their finance team can also answer questions and assist with applications. With the right loan or lease, you can drive off in your new Subaru on terms that fit your needs and budget.

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