Current car loan rates vary by lender, credit score, and loan term, but as of early 2024 most banks and credit unions are offering rates between 6% and 10% for new cars and 8% to 12% for used cars
The rate you see advertised is not the rate you will pay. Banks publish their best rates — the ones reserved for borrowers with credit scores above 740 and strong income. If your credit score is lower, your rate will be higher. If you are financing a used car instead of new, your rate will be higher. If you want a longer loan term to lower your monthly payment, your rate will be higher. The actual range you face depends on which of these factors explore to you.
Rates also move with the Federal Reserve's decisions. When the Fed raises its benchmark rate, lenders raise theirs within weeks. When the Fed cuts rates, lenders cut theirs more slowly. This means the rate available to you today may not be the rate available next month. Checking rates from multiple lenders — banks, credit unions, and online lenders — takes 15 minutes and costs nothing, because rate inquiries do not affect your credit score.
Key Takeaways
- New car loans typically carry lower rates than used car loans because the collateral is newer and more predictable in value.
- Your credit score is the single largest factor in the rate you receive; a score above 740 usually qualifies for the best advertised rates, while scores below 620 may face rates 4 to 6 percentage points higher.
- Loan term affects your rate: a 36-month loan usually carries a lower rate than a 72-month loan from the same lender, even though the monthly payment is higher.
- Credit unions often offer lower rates than banks to their members, and online lenders sometimes beat both, so comparing at least three sources takes less time than negotiating with a dealer.
How your credit score determines your rate
Lenders use your credit score to predict the risk that you will stop paying. A higher score means lower risk, so you get a lower rate. The relationship is not linear — the difference between a 650 score and a 700 score is usually smaller than the difference between a 700 and a 750. Most lenders have rate tiers, and you move into a better tier once you cross certain score thresholds.
If your score is below 620, many mainstream lenders will decline you outright. Subprime lenders — those specializing in borrowers with poor credit — will approve you, but at rates that can exceed 15% or even 20%. The monthly payment on a $25,000 car loan at 18% over 60 months is roughly $600; at 8%, it is roughly $460. Over the life of the loan, that difference adds up to thousands of dollars in extra interest.
You can check your own credit score for free through AnnualCreditReport.com, which is the only site authorized by federal law to provide free reports. Checking your own score does not lower it. If you find errors on your report, you can dispute them with the credit bureau at no cost. Fixing errors sometimes raises your score enough to move you into a better rate tier.
Why new cars have lower rates than used cars
A new car loses value predictably. Lenders have decades of data on how much a 2024 Honda Civic is worth at 12 months, 24 months, and 36 months. If you stop paying, the lender can repossess the car and sell it for a known amount. A used car is harder to value. A 2019 Civic with 80,000 miles could be in excellent condition or have hidden mechanical problems. If the lender repossesses it, the resale value is less certain.
This uncertainty costs you in the form of a higher rate. Used car rates are typically 1 to 3 percentage points higher than new car rates from the same lender. A used car with higher mileage or an older model year will face an even higher rate, because the resale value is less predictable.
How loan term affects your rate and payment
A shorter loan term means you pay off the debt faster, so the lender's money is at risk for less time. Lenders reward this by offering lower rates on 36-month and 48-month loans than on 60-month and 72-month loans. However, the monthly payment on a shorter loan is higher because you are spreading the same amount of money over fewer months.
The math looks like this: a $25,000 loan at 7% over 48 months costs about $580 per month. The same loan at 7% over 72 months costs about $415 per month. But if the 72-month loan carries a 9% rate instead of 7%, the payment is about $450 per month — higher than the 48-month loan at 7%, even though the term is longer. Before you choose a longer term to lower your payment, ask the lender what rate they will offer for each term. Sometimes the rate difference makes the longer term more expensive overall.
Where to find rates and what to compare
Banks, credit unions, and online lenders all publish their rates online. You do not have to go to a dealership to get a loan. In fact, getting pre-approved for a loan before you visit a dealer gives you leverage — you know exactly how much you can spend, and you can walk away if the dealer's rate is higher than what you already have.
When you compare rates, make sure you are comparing the same thing: same loan amount, same term, same type of vehicle (new or used), and same down payment. A bank might offer 6.5% on a new car with 20% down, but 7.5% on the same car with 10% down. The difference is real and matters.
Credit unions often have lower rates than banks, but you have to be a member. Some credit unions let you join based on where you live or work; others are restricted to employees of a specific company or members of a specific organization. If you are not already a member of a credit union, it is worth checking whether you are may be able to access for one before you explore for a car loan at a bank.
Dealer financing versus bank financing
Dealerships offer financing through captive lenders — finance companies owned by the car manufacturer. Ford Motor Credit, General Motors Financial, and Toyota Financial Services are examples. These lenders sometimes offer promotional rates (like 0% or 1.9%) on specific models to move inventory. If you see a promotional rate advertised, it is real, but it usually comes with conditions: you must have a credit score above a certain threshold, you must put down a minimum amount, or you must buy a specific model or trim level.
Dealer financing is convenient because you handle everything in one place. But convenience costs money. Dealers mark up the interest rate — they quote you a rate higher than what the lender actually charges, and they keep the difference. If you have a pre-approved rate from a bank or credit union, the dealer will sometimes match it or beat it to earn your business. If you do not have a pre-approval, the dealer has no reason to offer you their best rate.
What happens after you lock in a rate
Once you and a lender agree on a rate, the lender issues a rate lock or rate hold. This document guarantees that rate for a set period — usually 30 to 60 days. During that time, you can shop for a car without worrying that rates will change. If you do not find a car or do not complete the purchase within the lock period, the rate expires and you have to explore again.
The rate lock does not may provide approval. The lender will still verify your income, employment, and credit history. If something changes — you lose your job, your credit score drops, or you miss a payment — the lender can decline you or offer a higher rate. This is why it is important to avoid major financial changes between the time you get pre-approved and the time you sign the loan documents.
Frequently Asked Questions
Why is my rate higher than the rate I saw advertised?
Advertised rates are the lowest rates the lender offers, reserved for borrowers with excellent credit scores and strong income. Your rate depends on your credit score, the type of vehicle, the loan term, and your down payment. If your score is below 740, your rate will be higher than the advertised rate. Checking your credit report and score before you explore helps you understand what rate to expect.
Can I refinance my car loan if rates drop?
Yes. If you have a car loan and rates drop, you can explore for a new loan at a lower rate and use it to pay off the old loan. This is called refinancing. You will have to pay process fees and possibly a prepayment penalty on the old loan, so refinancing only makes sense if the new rate is at least 1 to 2 percentage points lower. Credit unions and online lenders often offer refinancing options.
Does paying a larger down payment lower my rate?
Putting down more money lowers the amount you borrow, which reduces the lender's risk. Many lenders offer slightly lower rates for larger down payments — typically 0.25 to 0.5 percentage points lower for 20% down versus 10% down. The difference is real but small. Before you drain your savings for a down payment, make sure you are not leaving yourself without an emergency fund.
What is the difference between APR and interest rate?
The interest rate is the percentage of the loan amount you pay in interest each year. The APR (annual percentage rate) includes the interest rate plus other costs like origination fees and insurance. Lenders are required to disclose both. When comparing loans, compare the APR, not just the interest rate, because it gives you the true cost of borrowing.
Should I get a co-signer to lower my rate?
A co-signer with a higher credit score can help you get approved for a loan you might not may have access to for alone, and sometimes lowers your rate. However, the co-signer is legally responsible for the full loan if you stop paying. Before you ask someone to co-sign, make sure you can afford the payment, because missing payments damages both your credit and theirs.