Know what rates to expect to find the best deal.
What is the average interest rate for a car loan?
The average interest rate on a new car loan is 5.76% as of November 2018
However, that doesn’t mean everyone gets that rate. Rates vary depending on your credit score and whether you’re buying a new car or used car.
|Credit score and type of car||Average rate|
|Excellent — new||3.47%|
|Excellent — used||4.19%|
|Very good — new||4.45%|
|Very good — used||5.94%|
|Good — new||7.55%|
|Good — used||10.63%|
|Fair — new||12.14%|
|Fair — used||16.72%|
|Poor — new||14.93%|
|Poor — used||19.51%|
Compare your car loan options
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.
- Banks or credit unions. Since you have an established banking relationship already, it might be easier to get approved, even if you don’t have the best credit. These lenders tend to offer the most competitive rates.
- Online lenders. Some online lenders borrowers with poor credit find a loan if they can’t qualify at their bank — though you probably won’t get the lowest rate available.
- Dealerships. Local dealerships often work with all credit ranges but they sometimes 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.
How do lenders come up with my rate?
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.
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.