Car loan interest rates vary widely based on your credit score, the loan term, and the lender
There is no single "average" APR for a car loan that applies to everyone. The rate you receive depends on your credit history, how much you put down, how long you want to borrow for, and whether you're buying new or used. A person with excellent credit might receive 4% from a bank, while someone with fair credit might see 8% to 10% from the same lender. Used car loans typically carry higher rates than new car loans.
The market rate also shifts with economic conditions and Federal Reserve policy. Rates that were common in 2021 differ from rates available today. When you shop for a loan, you'll see rates quoted as an APR — the annual percentage rate — which includes the interest rate plus any fees the lender charges, expressed as a yearly cost.
The best way to know what rate you might receive is to check with multiple lenders: banks, credit unions, and online lenders all quote rates differently. Many will give you a rate estimate without a hard credit inquiry, so you can compare before committing.
Key Takeaways
- Your credit score is the single biggest factor in the APR you receive; scores above 750 typically get the lowest rates available.
- Used car loans carry higher APRs than new car loans at the same lender, usually by 1% to 3 percentage points.
- Loan term matters: a 36-month loan usually has a lower rate than a 72-month loan from the same lender.
- Rates vary significantly between banks, credit unions, and online lenders, so comparing at least three sources before you buy is worth your time.
How credit score determines your rate
Lenders use your credit score to predict whether you'll repay the loan on time. A higher score signals lower risk, so you receive a lower rate. Credit scores typically range from 300 to 850, and most lenders divide borrowers into tiers.
Borrowers with scores of 750 and above generally receive the best rates a lender offers. Those in the 700–749 range see slightly higher rates. Scores between 650 and 699 move into "fair credit" territory, where rates climb noticeably. Below 650, rates jump again, and some lenders stop offering loans altogether. If your score is below 600, you may need a credit union or a lender that specializes in subprime loans, and you should expect rates in the double digits.
Your credit score reflects your payment history, how much debt you're carrying, how long you've had credit accounts open, and recent credit inquiries. If you're planning to buy a car in the next few months, paying down existing debt or correcting errors on your credit report can move your score enough to lower your rate by a full percentage point or more.
New cars versus used cars
New car loans almost always carry lower APRs than used car loans, even when the buyer has the same credit score. This is because new cars come with a manufacturer's warranty and hold their value more predictably. If you default, the lender can repossess and resell a new car more easily.
Used car loans typically run 1% to 3 percentage points higher than new car loans. A buyer with good credit might receive 5% on a new car but 7% or 8% on a used one. The older the car, the higher the rate tends to be. A car that's 10 years old will carry a higher rate than a 3-year-old car.
Some lenders won't finance cars older than a certain age or with mileage above a threshold. If you're buying a used car, ask the lender upfront what their limits are before you spend time on the process.
Loan term and how it affects your rate
The length of your loan — called the term — affects your APR. Shorter terms (36 to 48 months) typically have lower rates than longer terms (60 to 84 months). A lender charges more interest on a 72-month loan because the money is outstanding longer and the risk extends further into the future.
The difference is usually 0.5% to 1.5 percentage points between a 36-month and a 72-month loan. This means a longer loan costs you more in total interest, even though your monthly payment is lower. Before you choose a term based on payment alone, calculate the total interest you'll pay over the life of the loan.
Some lenders offer special rates for shorter terms as an incentive. If you can afford a 48-month payment, it's worth comparing that rate to a 60-month rate before deciding.
Where to find current rates
Banks, credit unions, and online lenders all publish rate ranges on their websites. These ranges show what borrowers with different credit profiles might receive, but your actual rate depends on your individual process. Start by checking your own bank or credit union, since members often receive better rates than non-members.
Credit unions typically offer competitive rates and may be more flexible with credit score requirements than large banks. Online lenders like LendingClub, Upstart, and others often process applications faster and may consider factors beyond your credit score.
When you request a rate quote, ask whether it's a soft inquiry (which doesn't affect your credit score) or a hard inquiry (which does). Soft inquiries let you shop around without penalty. Once you've narrowed your choices to two or three lenders, you can allow hard inquiries so they can make a formal offer.
What affects your rate beyond credit score
Your credit score is the primary factor, but lenders also consider your income, employment history, and debt-to-income ratio. If you have stable income and low existing debt, you may receive a better rate than someone with the same credit score but higher debt or a recent job change.
The size of your down payment also matters. A larger down payment reduces the lender's risk, and some lenders will lower your rate by 0.25% to 0.5% if you put down 20% or more. The loan-to-value ratio — how much you're borrowing compared to the car's value — influences pricing.
Whether you're buying from a dealer or private party can affect your options. Dealer financing sometimes includes promotional rates or incentives, but dealer rates are often higher than bank or credit union rates. Private party sales usually require you to find your own financing.
How to lock in a better rate
Once a lender quotes you a rate, ask how long that quote is valid. Most rate quotes expire in 7 to 14 days, so you need to complete your purchase within that window to receive the quoted rate. If rates are rising and you're not ready to buy, a longer quote validity period is valuable.
Some lenders allow you to lock in a rate before you've chosen a specific car. This protects you if rates rise while you're shopping. Ask whether the lender charges a fee for a rate lock and how long it lasts.
If you receive a loan offer but find a better rate elsewhere, contact your original lender and ask if they'll match it. Many will, especially if you've been a customer for years. Shopping around takes time but can save you hundreds of dollars over the life of the loan.
Frequently Asked Questions
What's a good APR for a car loan right now?
That depends on your credit score and the car type. Borrowers with excellent credit (750+) on new cars might see rates between 4% and 6%. Those with good credit (700–749) might see 6% to 8%. Fair credit (650–699) typically ranges from 8% to 12%. Used cars run 1% to 3% higher. Check multiple lenders to see what you may have access to for.
Can I get a lower rate after I've already taken out the loan?
Yes, through refinancing. If your credit score has improved or rates have dropped, you can refinance with a different lender and potentially lower your APR. Refinancing involves a new process and closing costs, so calculate whether the monthly savings justify the upfront expense. Most refinances make sense if you can lower your rate by at least 1 percentage point.
Do I have to use dealer financing?
No. You can bring your own financing from a bank or credit union to a dealer. This is often called "buying with outside financing." Dealers may offer promotional rates, but comparing their offer to your bank's offer before you sign is always wise. Some dealers will match or beat an outside offer.
How much does a down payment lower my APR?
A larger down payment typically lowers your rate by 0.25% to 0.5%, though this varies by lender. More importantly, a larger down payment reduces the amount you borrow, so you pay less total interest regardless of the rate. A 20% down payment is common and often triggers better pricing.
What if my rate seems too high?
Request a rate review from the lender and ask what factors led to that rate. If your credit score has improved since you applied, provide updated information. If the rate is still high, you can decline the loan and shop elsewhere. You have the right to walk away from any offer before you sign the final paperwork.