Car loan interest rates 2018 | finder.com

Car loan interest rates

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Know what rates to expect to find the best deal on your next auto loan.

Buying a car is more than just researching makes and models and negotiating at the dealership. You’ll also want to consider the interest rate on your car loan, which impacts the total price you pay for your new car. With increasing rates, get a leg up to understanding the average car loan interest rates out there and what you can do to get a lower rate.

What is the average interest rate for car loans?

As of August 2018, the average interest rate for a 60-month car loan is around 9.95%.

The rate you can expect on a car loan depends on a number of factors, but many lenders put the most weight on your credit score. Those who have excellent credit typically enjoy lower interest rates, with the average APR coming in at around 4.27% for a 60-month new car loan.

For people with less-than-perfect credit, the number can get much higher. If you have good to fair credit, your interest rate may range from 5.64% to 10.68%, with higher scores receiving lower rates. Unfortunately, those with poor credit tend to have the poorest rates — with APRs topping off at over 16%.

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Rates last updated September 21st, 2018

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Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
Name Product Product Description Minimum Credit Score Term of Loan Requirements
car.Loan.com Car Loans
Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
300
Varies by lender
Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
Auto Credit Express Car Loans
Get connected with an auto lender near you, even if you have bad credit.
300
Typically 3 to 6 years
Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
LendingClub Auto Refinancing
Lower your monthly car payments and save on interest through a fast and easy online application process.
Fair or poor credit
Minimum of 2 years
Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
MotoRefi Car Loan Refinancing
A car loan connection service for borrowers looking to refinance.
525
1–6 years
Must have an income of at least $2,000/month and have a vehicle with less than 100,000 miles.
myAutoloan.com Car Loans
Get up to four offers in minutes through one simple application. Multiple financing types available including new cars, used cars and refinancing.
550
24 to 84 months
Must have a Social Security number; make $24,000+/year; have no open bankruptcies.
LendingTree Auto Loans
Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
670
Typically 1 to 7 years
Must be a US citizen and 18+ years old. Must have good to excellent credit.
Capital One Auto Financing
You could qualify for a car loan of up to 40000, but not all dealers accept this bank's financing.
Good to excellent credit
36 to 72 months
Valid street address; existing Capital One accounts in good standing. Car must be a 2006 model or newer with less than 120,000 miles.
Wells Fargo Auto Loans
Auto loans with high loan amounts to cover your car purchase or refinancing needs.
Good to excellent credit
1 to 6 years
Your income and assets must support your existing debt obligations and the desired loan amount.

Compare up to 4 providers

Where can I find a car loan with competitive interest rates?

Comparing the rates at different banks, credit unions and online lenders is critical to finding the lowest one out there. We’d recommend beginning your search with the bank or credit union you do business with. Since you have an established banking relationship already, it may be easier to get your application approved, even if you don’t have the best credit. Many banks and credit unions also extend loans to nonmembers, so even if you think you may be able to find a better interest rate elsewhere, there’s no harm in applying.

You may also want to check out some online lenders to see if you meet their qualifications. Some can help borrowers with poor credit find a loan they might not otherwise qualify for. If you haven’t found a traditional lender willing to consider your application, an online lender may be a good option — though you probably won’t get the lowest rate available. Local dealerships could work with you no matter your credit range, but they tend to inflate the interest rate to make a profit.

8 tips to get the best rate on your car loan

Finding the best car loan interest rate involves preparing and plenty of research beforehand with a potential to save thousands of dollars. These tips should get you started on your journey to scoring a low rate on your next car loan.

1. Know your credit score

Before you start comparing loans, understand your credit report and how it impacts your finances. If you have multiple accounts open and have a high debt-to-income ratio, your application looks less favorable to lenders. On the other hand, if you have a clean record and an excellent score, you’ll want to know how low your rate can get — usually less than 5.5% for a new vehicle. Go into the car-buying process with your eyes open and a realistic goal in mind.

2. Compare rates from different lenders

Applying for multiple loans around the same time isn’t likely to hurt your credit since multiple inquiries for the same type of loan are generally shown as one inquiry on your credit report. This means you can apply for preapproval from multiple lenders without committing and damaging your overall score. This makes it easier to compare rates and find a loan suitable for your needs.

3. Get preapproved before visiting the dealer

When you compare your loans ahead of time, you could be preapproved at a low interest rate. This means you’ll have a tool to negotiate a low APR once you choose your next car.

4. Focus on the overall cost

Many buyers visit the dealer with an idea of how much they can pay each month. While this is great for your budget, it can lead to salespeople inflating the price of your car, usually by offering you a longer loan term — which equals paying more in interest. Your focus should be on the overall cost of the vehicle, that is, the sale price and the price you’ll end up paying at the end of your loan. Once you have this number, it’s much easier to determine what term length is best so you can handle the monthly payments.

5. Be willing to negotiate

If you decide to visit a car dealership without a preapproval, you’ll need to negotiate your interest and the price of the car. No matter how good your credit score is, you likely won’t be offered the lowest interest rate right off the bat. Dealerships are hoping you don’t question your rate, so come prepared knowing your credit score and the average rate you can get.

6. Don’t jump on the first deal

After researching, price shopping and comparing lenders, it might be tempting to take the first good interest rate that comes your way. Stay patient. Since your interest rate isn’t the only thing that impacts the final price of your car, spend the time determining how term length and vehicle cost change your budget. Most lenders offer a few days to decide on a loan and buy a car — you won’t be wasting time if you decide to take a moment to get your thoughts in order.

7. Check the fine print

Like most loans, car loans are notorious for their legalese. You should know how your interest is calculated and any potential fees. You’ll also want to confirm that your loan isn’t conditional when you visit a dealer. Conditional means “subject to change,” so your loan isn’t finalized when you drive off the lot. Your terms can change, which could leave you with a worse interest rate on a loan you thought you’d got a good deal on.

8. Apply with a cosigner

Lenders prefer poor-credit applicants apply with a cosigner because they act as a guarantee for the loan — if you’re unable to repay, your cosigner is responsible. This not only lowers the risk for the lender, but it can result in a lower rate for you.

Even applicants with decent credit can benefit from a cosigner or joint application. The lender considers the credit and income of both parties when reviewing your application, giving you a better chance of approval for a more affordable rate. Because of this, your cosigner has to meet or exceed the lender’s eligibility criteria.

How is my interest rate determined?

Lenders don’t just rely on your credit when they decide your interest rate. The more well-rounded your application, the better your chances of scoring a low rate. Although there are other factors that may play a role in your interest rate, these are the four main points lenders consider when reviewing your application:

  • Credit score. Those with higher scores generally have access to lower rates, so improving your credit history is an important part of getting a low rate on your car loan.
  • Income. Lenders consider your income because it reflects your ability to pay back the loan. They’ll also want to see a low debt-to-income ratio to make sure you can afford your loan.
  • Loan term. The loan term impacts your interest. Typically, shorter terms of 36 and 48though you probably won’t get the lowest rate available.months have lower interest rates, but your monthly payments are higher.
  • Vehicle. Your vehicle’s make and model also plays a role in your interest rate, especially if you’re buying a used car. Since it’s likely your car will be used as collateral for the loan, lenders often charge higher interest for cars that are likely to break down.

Bottom line

At the end of the day, you can lower the total price you pay for a new or used vehicle by ensuring you’ve found a good deal on your car loan interest rate. When shopping for a new car loan, don’t forget to do your research on each part of the process. If you already have a car loan with a high interest rate and think you could qualify for a lower one, you may want to consider auto refinancing.

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Kellye Guinan

Kellye Guinan is a writer and editor with finder.com and has years of experience in academic writing and research. Between her passion for books and her love of language, she works on creating stories and volunteering her time on worthy causes. She lives in the woods and likes to find new bug friends in between reading just a little too much nonfiction.

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