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There’s no doubt that buying a car is expensive. The average price of a new car is more than $36,000, and a used car costs more than $20,000 on average. However, for many buyers, a car’s price doesn’t tell the entire story about what it costs to buy it. Because most people take out a loan to buy a car, the interest rate on their auto loan drives the final cost of the car up. In fact, an auto loan’s interest rate is usually the second most expensive part of buying a car. If you can get a good auto loan interest rate, you can save thousands.  

Auto Loan Rates in December 2019

Credit Score New Car Loan Used Car Loan Refinance Car Loan
750+ 4.96% 5.21% 4.48%
700 - 749 5.01% 5.26% 5.01%
650 -699 11.93% 12.18% 8.01%
450-649 18.21% 18.46% 16.51%
449 or less 23.81% 24.06% 19.84%

To get current average auto loan rates, we looked at rates from MyAutoLoan for new-car loans, used-car loans, and car refinance loans for people with different credit scores. For new cars, we assumed a loan amount of $28,800, which is $36,000 (the current average price of a new car) minus a 20% down payment. For used cars, we assumed a loan amount of $16,000, which is the average price of a used car, minus a 20% down payment. For the refinance auto loan quotes, we assumed a loan amount of $15,000. These rates are for illustrative purposes only. Your individual car loan rate will vary.

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Average Auto Loan Rates for Excellent Credit

Credit Score New Car Loan Used Car Loan Refinance Car Loan
750+ 4.96% 5.21% 4.48%

A score of 750 points or higher is considered excellent credit. These borrowers are seen as having a very low risk by lenders, so they get charged less interest. If your credit score is in this range, you may qualify for financing incentives and loan deals offered by auto makers. These car deals can have financing as low as zero percent, potentially saving you thousands.

Average Auto Loan Rates for Good Credit

Credit Score New Car Loan Used Car Loan Refinance Car Loan
700 - 749 5.01% 5.21% 5.01%

Lenders consider people with a score in the range of 700 to 749 to be a fairly low risk. However, while people in this range would generally get charged below-average interest rates from banks, credit unions, and other lenders, they are unlikely to qualify for zero-percent financing offers from car companies.

Average Auto Loan Rates for Fair Credit

Credit Score New Car Loan Used Car Loan Refinance Car Loan
650 -699 11.93% 12.18% 8.01%

When your credit score is in the 600s, it starts to get expensive to borrow money. On the bright side, the rates for car loan refinancing are still relatively low for these borrowers. That means if you purchase a car with a high interest rate, you can refinance and save money once you’ve built up some equity.

Average Auto Loan Rates for Bad Credit

Credit Score New Car Loan Used Car Loan Refinance Car Loan
450-649 18.21% 18.46% 16.51%

People with poor credit are known as subprime borrowers. Lenders see people with subprime credit as being at a higher risk for not paying a loan back. As a result, lenders charge these borrowers higher interest rates to protect against loss. Some lenders won’t even work with borrowers in this credit range. Learn more about how to buy a car with bad credit.

Average Auto Loan Rates for Deep Subprime Credit

Credit Score New Car Loan Used Car Loan Refinance Car Loan
449 or less 23.81% 24.06% 19.84%

Deep subprime borrowers will likely have a hard time finding a lender for a car loan, and when they do, they will pay extremely high interest rates. These high interest rates can add thousands of dollars to the overall price of a car and make monthly car payments extremely high.

Why Does a Low Car Loan Rate Save Me Money?

Let’s look at the different auto loan rates above and see how they impact your bottom line. We’ll use a loan term of five years and a new-car loan amount of $28,800 (which is the amount left to finance after a 20% down payment on the average price of a new car at $36,000). Using the average interest rate for people with top-notch credit, 4.96%, that works out to $3,778 in interest payments. People with good credit will pay just a bit more, with $3,817 in interest. When the rate jumps to 11.93% for people with fair credit, total interest payments also jump, hitting $9,577. At 18.21%, the average new-car interest rate we found for people with poor credit, the total interest comes to $15,277. At 23.81%, the interest on the loan hits a whopping $20,721. That’s nearly two thirds of the car’s purchase price of $36,000 and about $17,000 in added costs compared to what someone with excellent credit would pay.

Use our car loan calculator to find out how much you'd pay for a loan.

Let’s do the same thing for a loan on a used car. We’ll use a loan amount of $16,000. Borrowers with top-tier credit and an average interest rate of 5.21% would pay just $2,209 in interest over the life of a five-year loan. Total interest paid for the loan would hit $2,231 for buyers with good credit and an interest rate of 5.26%. At 12.18%, the rate for buyers with fair credit, total interest costs hit $5,442 over five years. Buyers with poor credit get an interest rate of 18.46%, and pay $8,619 in interest. For deep subprime borrowers with an average five-year used-car loan rate of 24.06%, total interest on their car loan is $11,651, nearly $9,500 above what someone with excellent credit would pay in interest.

Why Is My Auto Loan Interest Rate So High?

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Car loan rates are driven by two main factors: borrowing interest rates set by the Federal Reserve and your credit score. When the federal reserve keeps interest rates low, borrowing money to buy a car tends to be less expensive. Throughout 2018, the Federal Reserve raised interest rates, so it is getting more expensive to buy a car. This trend is expected to continue in 2019.

After rates set by the Federal Reserve, your credit score has the most impact on the car loan interest rate you’ll pay. If you have a good credit score, you’ll qualify for a lower interest rate. When you finance a car, you borrow the amount of money you need to buy the car, and the lender charges you interest. The interest is basically rent on the money you borrow. It allows the lender to make a profit and get more of their money back if you default on a loan. You can read more about how financing a car works and check out our guide to car loans and leasing for more details.

Lenders perceive people with low credit scores as less likely to pay back the money they borrow. Factors that can contribute to a low credit score include things like being late on loan payments and other bills, having a high level of debt, or failing to repay loans. All of these factors indicate that a borrower has trouble managing money.

Other factors that impact your auto loan rate are the type and length of the loan. Used-car loans have a higher interest rate than new-car loans because used cars have a lower resale value than new cars. If you default on a used car loan, the lending company will be left with a lower-value asset to sell. They charge more interest to protect themselves and recoup more of their money in case the loan goes into default.

The length of the loan you’re looking for also affects your interest rate. A longer loan term means lower monthly payments, but it also means that you’ll be taking longer to pay the lender back. A higher interest rate helps them get more of their money back upfront, in the event you default on the loan.

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How Do I Get a Lower Car Loan Rate?

The best way to lower your car loan interest rate is to improve your credit score. It may take a while, but if you pay bills on time and lower your debt-to-income ratio, your credit score will improve. As you get a better credit score, you will qualify for better auto loan rates, and you’ll save money on your car purchase. Read more about how to buy a car with bad credit for other ways to improve your credit score.

Once you have an improved credit score, shop around for car loan rate quotes. By getting quotes from multiple lenders, you’ll be able to choose the one that saves you the most money. You’ll also have an idea of what you should be paying in interest before you head to the dealership. Car dealers usually offer financing, but unless you know the rates you qualify for, you won’t know if the dealer is offering you a good or a bad financing deal. Having financing offers in hand gives the dealer an interest rate to beat if they want your financing business.

myAutoloan

APR Range: 1.99% - 27%

Loan Term: 24 - 84 months

Loan Range: $8,000 - $100,000

Applicant Requirements:

At least 18 years old, resident of the U.S. (except Alaska and Hawaii), with min. income of $1,800/month and min. credit score of 500

Vehicle Requirements:

Max mileage of 125,000 miles, 10 years old or newer

myAutoloan presents up to four offers from a variety of participating lenders based on your specific loan requirements, offering a wide variety of choice and selections.

LightStream

APR Range: 3.34% - 17.49% (AutoPay Discount of 0.50% also included)

Loan Term: 24 - 144 months

Loan Range: $5,000 - $100,000

Applicant Requirements:

Must have good to excellent credit*

Vehicle Requirements:

No restrictions

LightStream caters heavily to applicants with very strong credit scores, offering a streamlined application process and a Rate Beat program that guarantees they'll beat any other qualifying offers an applicant receives.

Capital One

APR Range: 3.99% - 10.08%

Loan Term: 36 - 72 months

Loan Range: $4,000+

Applicant Requirements:

$1,800/month minimum income requirements, resident of the U.S. (except Alaska or Hawaii)

Vehicle Requirements:

Limited to vehicles available through the Capital One network of dealers

Capital One offers a pre-qualification, which allows you to take your offer to any participating dealer within 30 days.

Chase

APR Range: 4.29% - 24.99%

Loan Term: 48 - 72 months

Loan Range: $4,000+

Applicant Requirements:

At least 18 years old

Vehicle Requirements:

Limited to vehicles available through the Chase network of dealers, no older than 2008

After your application is approved, Chase will send the information to the dealer you choose. The offer is good for 30 days.

Bank of America

APR Range: 3.49+%

Loan Term: 12 - 75 months

Loan Range: $7,500 - $100,000

Applicant Requirements:

At least 18 years old (19 in Alabama or Nebraska) U.S. resident

Vehicle Requirements:

Max mileage of 125,000 miles, 10 years old or newer, valued at $6,000+, plus additional restrictions

Bank of America Preferred Rewards clients can receive an interest rate discount of 0.25-0.50% depending on their tier at the time of applying for an auto loan.

Company

Details

Requirements

Descriptions

myAutoloan

APR Range: 1.99% - 27%

Loan Term: 24 - 84 months

Loan Range: $8,000 - $100,000

Applicant Requirements:

At least 18 years old, resident of the U.S. (except Alaska and Hawaii), with min. income of $1,800/month and min. credit score of 500

Vehicle Requirements:

Max mileage of 125,000 miles, 10 years old or newer

myAutoloan presents up to four offers from a variety of participating lenders based on your specific loan requirements, offering a wide variety of choice and selections.

LightStream

APR Range: 3.34% - 17.49% (AutoPay Discount of 0.50% also included)

Loan Term: 24 - 144 months

Loan Range: $5,000 - $100,000

Applicant Requirements:

Must have good to excellent credit*

Vehicle Requirements:

No restrictions

LightStream caters heavily to applicants with very strong credit scores, offering a streamlined application process and a Rate Beat program that guarantees they'll beat any other qualifying offers an applicant receives.

Capital One

APR Range: 3.99% - 10.08%

Loan Term: 36 - 72 months

Loan Range: $4,000+

Applicant Requirements:

$1,800/month minimum income requirements, resident of the U.S. (except Alaska or Hawaii)

Vehicle Requirements:

Limited to vehicles available through the Capital One network of dealers

Capital One offers a pre-qualification, which allows you to take your offer to any participating dealer within 30 days.

Chase

APR Range: 4.29% - 24.99%

Loan Term: 48 - 72 months

Loan Range: $4,000+

Applicant Requirements:

At least 18 years old

Vehicle Requirements:

Limited to vehicles available through the Chase network of dealers, no older than 2008

After your application is approved, Chase will send the information to the dealer you choose. The offer is good for 30 days.

Bank of America

APR Range: 3.49+%

Loan Term: 12 - 75 months

Loan Range: $7,500 - $100,000

Applicant Requirements:

At least 18 years old (19 in Alabama or Nebraska) U.S. resident

Vehicle Requirements:

Max mileage of 125,000 miles, 10 years old or newer, valued at $6,000+, plus additional restrictions

Bank of America Preferred Rewards clients can receive an interest rate discount of 0.25-0.50% depending on their tier at the time of applying for an auto loan.

Disclaimer: All information provided here is based on Annual Percentage Rate estimates from the websites of the individual lenders on 12/18/2018. It is not a binding or guaranteed loan offer. Individual auto loan rates will vary.

Notes: In compiling this data, we used new-car purchase rates for Virginia.

*To meet LightStream's standard for good credit, you must have several years of credit history with a variety of account types, including credit cards, installment debt (vehicle loans), and mortgages. LightStream also prefers to see few, if any, delinquencies and a history of savings, evidenced by things like deposit accounts and manageable revolving credit card debt. You'll also want to provide proof of stable and sufficient income to repay current debt obligations as well as any new loan with LightStream.

You can also save on your auto loan by choosing a shorter loan length or putting more money down on your car, which lessens the amount of money you have to borrow.

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If you can’t raise your credit score enough to get a better car loan rate by the time you need to buy a car, you can get a loan with a higher rate, make the payments and work to refinance your car loan to a lower rate later. While you’ll still spend more on interest than if you had gotten the lower rate to start with, you’ll still probably pay less overall than if you kept the higher-interest loan for the full term.

Car Loans and Leasing | How to Finance a Car | How to Finance a Used Car