Current car loan interest rates range from about 4% to 13%, depending on your credit score, the loan term, whether the car is new or used, and your lender
There is no single "average" rate that applies to everyone. A borrower with a credit score above 750 might get a new car loan at 4% to 6% from a bank or credit union, while someone with a score below 620 could see rates above 10% from a subprime lender. Used car rates run 1% to 3% higher than new car rates at the same lender. The term you choose — how many months you take to repay — also shifts the rate: a 36-month loan typically costs less in interest than a 72-month loan, but the monthly payment is higher.
Interest rates also move with the Federal Reserve's decisions and general economic conditions. When the Fed raises its benchmark rate, lenders raise theirs. When it cuts rates, lenders usually follow within weeks or months. This means the rate you see today may not be the rate available next month.
Key Takeaways
- Your credit score is the single biggest factor in the rate you receive — a 100-point difference in your score can mean a 2% to 4% difference in your rate.
- New cars cost less to borrow for than used cars, and shorter loan terms cost less in total interest even if the monthly payment is higher.
- Banks, credit unions, and captive lenders (owned by the car manufacturer) often offer different rates for the same borrower, so checking multiple sources matters.
- The rate you see advertised online or in a dealer's window is usually the best-case rate, reserved for borrowers with excellent credit and a large down payment.
How your credit score determines your rate
Lenders use your credit score as the primary signal of how likely you are to repay on time. A score of 750 or higher typically qualifies you for rates in the 4% to 6% range on a new car. A score between 650 and 749 usually lands you in the 6% to 9% range. Below 650, rates climb into double digits.
The relationship is not linear — the jump from 620 to 640 might add 2% to your rate, while the jump from 740 to 760 might add only 0.5%. Lenders have internal cutoffs where rates shift, and those cutoffs vary by lender. This is why checking with multiple lenders — even if you have the same score — can reveal different offers.
If your score is below 620, you will likely need a subprime lender, which specializes in borrowers with poor credit or no credit history. Subprime rates often exceed 12% and sometimes reach 18% or higher. Some subprime lenders also require a larger down payment or a co-signer.
The difference between new and used car rates
New cars carry lower interest rates because they are less risky for lenders. A new car has a warranty, predictable maintenance costs, and a known resale value. A used car is more likely to need repairs, and its value is harder to predict. Lenders price that risk into the rate.
The gap typically ranges from 1% to 3%, depending on the car's age and mileage. A used car that is 3 to 5 years old might be 1.5% higher than a new car rate. A used car that is 10 years old might be 3% higher. Some lenders will not finance cars older than a certain age — often 10 to 15 years — regardless of the borrower's credit score.
How loan term affects your total cost
A longer loan term lowers your monthly payment but raises the total interest you pay. A $30,000 car loan at 6% costs roughly $1,800 in interest over 36 months (monthly payment around $900), but roughly $4,800 in interest over 72 months (monthly payment around $500). The rate itself does not change much between terms — a 72-month loan might be 0.25% to 0.5% higher than a 36-month loan — but the extra months mean much more interest overall.
Most lenders offer terms from 36 to 84 months. Anything longer than 72 months is sometimes called "upside-down financing" because you owe more than the car is worth for much of the loan. This creates risk if you need to sell or trade the car before it is paid off.
Where to find the best rate for your situation
Three types of lenders compete for car loans: banks, credit unions, and captive lenders (owned by the car manufacturer). Banks offer rates based on your credit score and the car's details. Credit unions often offer lower rates to members, especially if you have been a member for a while or have other accounts there. Captive lenders — like Ford Credit or Toyota Financial Services — sometimes offer promotional rates (like 0% for well-may have access to buyers) but may charge more if you do not meet their top tier.
Get pre-approved by at least two or three lenders before you visit a dealership. Pre-approval tells you the rate and term you actually may have access to for, not the advertised best-case rate. When you shop at the dealership, the dealer's finance office may offer a different rate — sometimes better, sometimes worse — because they have relationships with multiple lenders and can shop your process around.
Online lenders and marketplace sites can also provide quotes, though they typically require a hard credit pull (which temporarily lowers your score). Doing multiple hard pulls within 14 days usually counts as a single inquiry for credit scoring purposes, so shopping around in a short window minimizes the damage to your score.
What affects your rate beyond credit score and car type
Your down payment size influences the rate. A larger down payment means you are borrowing less, which is less risky for the lender. Some lenders offer a 0.25% to 0.5% rate reduction for a down payment of 20% or more. Your income and employment history also matter — lenders want to see stable income, and a recent job change or gap in employment can raise your rate or disqualify you entirely.
The loan-to-value ratio (LTV) — the amount you borrow divided by the car's market value — also plays a role. If you are financing 120% of the car's value (because you rolled negative equity from a previous loan into this one), lenders see higher risk and may charge more. Some lenders will not finance above 110% LTV at all.
How to improve your rate before you borrow
If your credit score is below 700, waiting a few months to build it can save you thousands in interest. Paying down existing debt, correcting errors on your credit report, and making all payments on time will raise your score. Even a 50-point increase can lower your rate by 1% or more.
Saving for a larger down payment also helps. A 20% down payment instead of 10% reduces the amount you borrow and often qualifies you for a better rate. It also protects you from being underwater on the loan early on.
If you have a co-signer with better credit, their score will be used in the rate calculation, and you may may have access to for a lower rate. However, the co-signer is legally responsible for the loan if you do not pay, so this is a significant commitment for them.
Frequently Asked Questions
What is the average interest rate right now?
Rates vary widely by lender, credit score, and car type, so there is no true average. As a rough guide, borrowers with good credit (700+) on new cars are seeing rates between 5% and 7% from banks and credit unions. Rates change frequently as the Federal Reserve adjusts its benchmark rate, so checking current offers from multiple lenders gives you the most accurate picture of what is available to you.
Can I get a 0% interest rate?
Yes, but only if you meet strict requirements: usually a credit score above 750, a substantial down payment, and a new car from a manufacturer running a promotional offer. Captive lenders (like Ford Credit) offer 0% deals periodically, but they are reserved for their most creditworthy borrowers. If you do not may have access to, the next-best option is shopping for the lowest rate available to you across multiple lenders.
Does shopping around for rates hurt my credit score?
Multiple loan inquiries within 14 days typically count as a single inquiry for credit scoring purposes, so shopping around in a short window causes minimal damage — usually a 5 to 10-point temporary dip. This recovers within a few months. Waiting weeks or months between applications, however, means each inquiry counts separately and adds up.
Should I get a longer loan term to lower my monthly payment?
A longer term lowers your monthly payment but costs significantly more in total interest. A 72-month loan on a $30,000 car might cost $4,800 in interest versus $1,800 on a 36-month loan. If you can afford the higher monthly payment, a shorter term saves money. If you cannot, a longer term is better than not borrowing at all — just be aware of the trade-off.
What if I have bad credit — can I still get a car loan?
Yes. Subprime lenders specialize in borrowers with credit scores below 620 and will often approve loans that traditional banks decline. Rates are higher — often 12% to 18% — and you may need a larger down payment or a co-signer. Some subprime lenders also require you to use a starter interrupt device, which disables the car if you miss a payment. Compare offers from multiple subprime lenders, as rates vary significantly.