Car loan interest rates right now depend on your credit score, the loan term, and the lender
There is no single "current" car loan rate. Banks, credit unions, and online lenders all set their own rates based on what they think the risk is. The Federal Reserve does set a benchmark rate that influences what lenders charge, but your actual rate depends mostly on your credit history, how much you are borrowing, how long you want to pay it back, and whether the car is new or used.
As of late 2024, average rates for new car loans sit somewhere between 6% and 7% for borrowers with good credit, though rates for used cars run higher — often 8% to 10% or more. Borrowers with poor credit may see rates above 12%. These are averages; your rate could be lower or higher depending on the lender and your specific situation.
The best way to know what you will actually be offered is to check with multiple lenders — your bank, a credit union you belong to, and at least one online lender. Most will give you a rate estimate without a hard credit pull, so you can compare without damaging your credit score.
Key Takeaways
- Your car loan rate depends on your credit score, the loan term you choose, whether the car is new or used, and which lender you use.
- Average rates for borrowers with good credit are typically between 6% and 7% for new cars, but used car rates are usually higher.
- Getting rate quotes from at least three different lenders — a bank, a credit union, and an online lender — takes less than an hour and can save you hundreds of dollars.
- A soft credit inquiry for a rate estimate does not hurt your credit score, but a hard inquiry does, so ask lenders which type they use.
How your credit score affects the rate you are offered
Lenders use your credit score as the primary signal of how likely you are to pay back the loan. A higher score means lower risk, which means a lower rate. The difference between a 750 credit score and a 650 credit score can easily be 2% to 3% in interest rate — on a $30,000 loan over five years, that difference costs you thousands of dollars.
Credit scores typically range from 300 to 850. Most lenders consider 660 to 700 the threshold between "fair" and "good" credit. If your score is below 620, you may still find lenders willing to work with you, but rates will be significantly higher, and some lenders will decline you altogether.
You can check your own credit score for free through AnnualCreditReport.com, which is the only federally authorized site for free credit reports. Knowing your score before you shop for a loan helps you understand what rate range to expect and whether it makes sense to wait and improve your score before borrowing.
How loan term and car age change your rate
A longer loan term — say, 72 months instead of 48 months — usually comes with a higher interest rate because the lender is taking on more risk over a longer period. A shorter term means you pay less interest overall, but your monthly payment is higher.
Used cars almost always carry higher rates than new cars, even if the borrower has excellent credit. A used car is worth less, depreciates faster, and is harder to repossess and resell if you default. A five-year-old car might cost you 1% to 3% more in interest than a brand-new model from the same manufacturer.
The age of the car matters too. A one-year-old used car will have a lower rate than a seven-year-old used car. Some lenders have cutoff points — they may not finance cars older than 10 years, or they may charge a flat rate bump for anything over 8 years old.
Where to get rate quotes and what to compare
Start with your own bank or credit union. Many credit unions offer rates lower than banks, especially if you have been a member for a while. Then get quotes from at least one online lender — LendingClub, Upstart, and Lightstream are common options — and one traditional bank you do not currently use.
When you request a quote, ask whether the lender is doing a soft or hard credit inquiry. A soft inquiry does not affect your credit score. A hard inquiry does, but multiple hard inquiries for the same type of loan within 14 to 45 days typically count as a single inquiry for credit scoring purposes, so shopping around does not hurt you as much as it used to.
Compare not just the interest rate but also the loan term options, any fees (origination fees, prepayment penalties), and whether you can lock in the rate before you find a car. Some lenders let you lock a rate for 30 to 60 days; others do not.
How the Federal Reserve rate influences what you pay
The Federal Reserve sets a target range for the federal funds rate, which is the rate banks charge each other for overnight loans. This is not the rate you pay on a car loan, but it influences it. When the Fed raises its rate, banks' cost of borrowing goes up, and they pass some of that cost to you through higher car loan rates. When the Fed cuts rates, car loan rates typically fall, though usually with a lag of a few weeks.
The Fed's rate changes are announced publicly and happen several times a year. You can track the current federal funds rate on the Federal Reserve's website. However, car loan rates do not move in lockstep with Fed changes — lenders also adjust based on their own funding costs, competition, and how much demand they have for car loans.
What happens to your rate after you are approved
Once a lender approves you and you sign the loan documents, your interest rate is locked in. It does not change if the Fed raises rates the next day or if your credit score drops. The rate you agreed to is the rate you pay for the life of the loan.
Some lenders offer a rate-lock period before you buy the car — typically 30 to 60 days. This means you can shop for a car without worrying that rates will move against you. Other lenders require you to have already picked out the specific car before they lock in a rate.
If you refinance the loan later — taking out a new loan to pay off the old one — you will get a new rate based on your credit score and the market conditions at that time. Refinancing can make sense if rates have dropped significantly or if your credit score has improved.
Comparing fixed rates versus variable rates
Nearly all car loans are fixed-rate loans, meaning your interest rate and monthly payment stay the same for the entire loan term. This makes budgeting predictable and protects you if rates rise.
Some lenders, particularly credit unions, occasionally offer variable-rate car loans where the rate can change over time. These usually start lower than fixed rates, but the rate can go up if the Fed raises rates or if the lender's cost of funds increases. Variable-rate car loans are less common and carry more risk, so most borrowers choose fixed rates.
Frequently Asked Questions
Can I get a lower rate if I make a larger down payment?
A larger down payment reduces the amount you borrow, which lowers the lender's risk. Some lenders will offer a slightly lower rate if you put down 20% or more. However, the rate difference is usually small — often 0.25% to 0.5%. It is worth asking, but do not drain your emergency savings to make a large down payment if it means you have no cushion.
What if I have bad credit — can I still get a car loan?
Yes, but rates will be higher, often 10% to 15% or more. Credit unions and some online lenders specialize in loans for borrowers with poor credit. You may also need a co-signer with better credit, or you may need to make a larger down payment. Getting multiple quotes is even more important in this situation because rates vary widely.
Should I get pre-approved before I go to the dealership?
Yes. Pre-approval from your bank or credit union gives you a rate and a maximum loan amount before you shop. You can then compare that offer to whatever the dealership offers. Dealerships sometimes have access to lenders with different rates, but having your own pre-approval prevents you from accepting a worse deal out of convenience.
Can I negotiate the interest rate with the lender?
Not really. Lenders use automated systems to calculate your rate based on your credit score, income, debt, and the car details. There is no haggling room like there is with a car price. Your only leverage is shopping around and choosing the lender with the best offer.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the money. The APR (annual percentage rate) includes the interest rate plus any fees the lender charges, expressed as an annual rate. When comparing loans, always compare APRs, not just interest rates, because the APR tells you the true cost.