The typical car loan is between $20,000 and $30,000, runs for 60 to 72 months, and carries an interest rate somewhere between 5% and 10% depending on your credit score and the lender

Those numbers shift constantly based on what the Federal Reserve does with interest rates, what banks are competing for, and whether you're buying new or used. A person with excellent credit might get 4.5% from a credit union while someone with fair credit pays 8% at a dealership. The loan term — how many months you have to pay it back — has stretched over the past decade; 84-month loans are now common, though they cost you more in interest overall.

What matters more than any single number is understanding what goes into your own loan: how much you're actually borrowing, what rate you'll pay, and how long you'll be making payments. Those three things determine whether a loan feels manageable or becomes a weight.

Key Takeaways

  • Most car loans run between 60 and 72 months, though 84-month loans are increasingly common and cost significantly more in total interest.
  • Interest rates vary widely based on credit score, lender type, and market conditions — the same car can cost you thousands more or less depending on where you borrow.
  • The average loan amount has risen because vehicle prices have risen, not because people are borrowing more aggressively than before.
  • Your down payment, trade-in value, and the vehicle's price all affect how much you actually borrow and what you'll pay in interest.

How loan amounts have changed

The average financed amount — the money you actually borrow — has climbed from roughly $15,000 in 2010 to $20,000–$30,000 today. This is almost entirely because new car prices have gone up, not because buyers are taking on riskier debt. A new sedan that cost $22,000 in 2010 costs $28,000 now, so the loan is larger.

Used car loans tend to be smaller, typically $15,000 to $20,000, because used vehicles cost less upfront. But used car interest rates are often higher than new car rates, sometimes by 1% to 3%, because lenders see more risk in older vehicles.

Your down payment shrinks the amount you borrow. A 20% down payment on a $28,000 car means you borrow $22,400 instead of $28,000. Many people put down less — sometimes 10% or nothing — which means they borrow more and pay more interest over time.

Interest rates and what affects them

Your interest rate depends on four main things: your credit score, the lender you choose, whether the car is new or used, and the loan term itself. A credit score above 750 might get you 4% to 5% from a bank or credit union. A score between 650 and 700 might get you 7% to 9% from a dealership. Below 650, rates can climb to 10% or higher.

Credit unions almost always offer lower rates than dealerships, sometimes by 1% to 2%. Banks fall in the middle. Dealerships offer convenience — you can finance the car you're buying right there — but you pay for that convenience in a higher rate.

Longer loan terms come with higher interest rates. A 60-month loan might be 5.5%, while an 84-month loan on the same car might be 6.5%. The lender is taking on more risk over a longer period, so they charge more.

Why loan terms have gotten longer

Twenty years ago, a 60-month car loan was standard. Today, 72-month loans are common, and 84-month loans are offered regularly. This happened because car prices rose faster than wages, so lenders stretched out the payment period to keep monthly payments affordable.

The problem is that a longer loan means you pay more total interest. On a $25,000 loan at 6%, a 60-month loan costs about $3,900 in interest. The same loan over 84 months costs about $5,400 in interest — $1,500 more. You're also "underwater" on the loan longer, meaning you owe more than the car is worth for a bigger chunk of the loan's life.

Some people choose longer terms because they want a lower monthly payment. Others are pushed into them because their credit score or income doesn't support a shorter term. Either way, the longer you borrow, the more you pay.

Monthly payments and what they include

Your monthly car payment covers three things: principal (the money you borrowed), interest (what the lender charges), and sometimes insurance and taxes bundled in. On a $25,000 loan at 6% over 72 months, your payment is roughly $390 to $410 per month before insurance and registration.

Early in the loan, most of your payment goes toward interest. Late in the loan, most goes toward principal. This is why paying extra early in the loan saves you significant money — you're reducing the balance that interest is calculated on.

Some lenders let you make extra payments without penalty. Others charge a prepayment fee. Before you sign, ask whether you can pay off the loan early without cost.

New versus used car loans

New car loans average slightly higher amounts — $28,000 to $32,000 — because new cars cost more. But new car interest rates are usually lower, sometimes by 1% to 3%, because new cars are less risky for lenders. A new car has a warranty and predictable reliability; a used car's condition is less certain.

Used car loans average $15,000 to $22,000 depending on the vehicle's age and condition. The interest rate is higher, but the total amount borrowed is smaller, so the monthly payment might be similar to a new car loan or even lower.

Certified pre-owned vehicles — used cars inspected and warrantied by the dealer — sometimes get interest rates closer to new car rates because they carry a dealer's may provide.

How to compare loan offers

When you get loan offers from different lenders, compare three numbers: the interest rate, the loan term, and the total amount of interest you'll pay over the life of the loan. A lower rate doesn't always mean a better deal if the term is much longer.

Ask each lender for the annual percentage rate, or APR. This is the true cost of borrowing and includes the interest rate plus any fees. Two lenders might quote different interest rates, but their APRs might be nearly identical once fees are factored in.

Get pre-approved by a bank or credit union before you go to a dealership. Knowing your rate and term in advance gives you leverage to negotiate. Dealerships often match or beat outside offers to keep the sale.

Frequently Asked Questions

What's a good interest rate for a car loan right now?

That depends on your credit score and the lender. With excellent credit (750+), 4% to 5% is typical from a credit union or bank. With good credit (700–749), expect 5% to 6%. With fair credit (650–699), you're looking at 7% to 9%. Rates change weekly based on the Federal Reserve's decisions, so what's "good" shifts over time.

Should I always choose the shortest loan term I can afford?

Shorter terms save you money in interest, but they raise your monthly payment. A 60-month loan costs less total interest than a 72-month loan, but your payment is higher each month. Choose the shortest term your budget can handle without leaving you unable to cover emergencies or maintenance.

Can I get a car loan with bad credit?

Yes, but you'll pay a higher interest rate — often 10% or more. You may also need a larger down payment or a co-signer. Credit unions sometimes work with people who have lower scores better than dealerships do. Getting pre-approved before shopping tells you what rate you'll actually face.

What happens if I pay off my car loan early?

You stop paying interest on the remaining balance, which saves you money. Some lenders charge a prepayment penalty, though this is less common now. Always ask before signing whether early payoff is allowed without a fee.

Why is my interest rate higher than what the lender advertised?

Advertised rates are usually the best rates available to people with excellent credit. Your actual rate depends on your credit score, income, the vehicle, and the loan term. A dealership might also add fees that raise your APR. Always ask for your APR in writing before you sign.