The human race is facing a deadline. If we hope to prevent a devastating climate crisis, we need to reduce our global CO2 emissions. To keep things from getting worse, we need to reduce our emissions by 50 percent before 2030 with the goal of reaching net-zero emissions by 2050.
One of the best ways for the average consumer to reduce their carbon footprint is to replace their gasoline- or diesel-powered daily driver with an electric vehicle. This is where green auto loans come in. What are green auto loans and what should drivers know about them in 2022?
EVs on the Rise
In August 2021, President Biden signed an executive order stating that half of all cars sold in the United States needed to be electric by 2030. Additionally, the government plans to convert its fleets to 100% zero-emission vehicles by 2035. Electric vehicles are gaining momentum as they begin to become more affordable. Manufacturers sold 3 million units in 2020, a number they more than doubled in 2021.
Consumers are becoming more concerned about their impact on the environment. Those with the means have either converted to electric vehicles or are planning to do so in the future. Green auto loans can help make that dream come true for more people.
Explaining Green Auto Loans
When shopping for a new car, the first place most people go is on the hunt for an auto loan. Lenders are only too happy to offer loans based on an individual’s creditworthiness, income, and other factors known only to the lender. How are green loans different from standard auto loans?
The short answer is that these loans are specifically for electric, hybrid, or other low-emissions vehicles. You wouldn’t be able to get a green auto loan for a Mustang, for example, unless you opted for the new electric Mustang Mach-E.
These green auto loans are similar to standard auto loans in many respects. You still need to apply through a lender and you’ll be assigned an interest rate based on your credit score. You’ll still need to make regular monthly payments until the loan is repaid. This is where the similarities between the two loan types end.
Aside from only applying to electric and low-emission vehicles, green auto loans often have lower interest rates. You may also qualify for rate discounts, depending on the lender and the make and model of EV you choose.
The high cost of EVs means green auto loans often have an extended repayment period. This will make it easier to afford a more expensive car, but these long repayment periods can help reduce your monthly payments. It also has the potential to make it easier to buy out the lease before the end of its payment period.
Qualifying for a Green Auto Loan
Unlike traditional auto loans, you won’t generally find a green auto loan at a bank or regular lender. Local credit unions offer most green auto loans. If you already have an established relationship with your local credit union, then qualifying for one of these loans could be as simple as making an appointment with your banker.
If you don’t have an account with a credit union, you may still be able to apply for a loan as long as you meet their other criteria. These criteria can include but are not limited to things like a high credit score, a stable income, and the financial means to make a significant down payment to secure the loan. In this case, it is very similar to applying for a standard auto loan.
Creating a More Sustainable Future
If you’re planning to buy an electric or low-emissions vehicle soon, take the time to shop around to see if a green auto loan might be the best option for you. These loans have lower interest rates and longer repayment terms and can help turn your dream of owning an EV into a reality.
Martin Banks is the Founder and Editor-in-Chief of Modded. He covers the world of cars, driving, tech, and more.
Editor’s Note: The opinions expressed in this article are those of the author.