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Because car loans are secured by the vehicle you buy, you can expect lower interest rates, sometimes under 5%. Generally, you need strong personal finances to qualify for the most competitive rates — especially a good credit score of at least 670.
Here is the average APR you can expect broken down by credit score and eight of the top lenders that offer the best auto loan rates.
The average interest rate on a new car loan for a borrower with good credit is 4.60% as of December 2021. Your APR will depend on your credit score, loan term, debt-to-income (DTI) ratio and whether you’re buying a new or used car.
| Credit score | Average new car rate | Average used car rate |
|---|---|---|
| Excellent (super prime): 781 to 850 | 2.58% | 3.68% |
| Very good (prime): 661 to 780 | 3.64% | 5.35% |
| Good (near prime): 601 to 660 | 6.32% | 9.77% |
| Fair (subprime): 501 to 600 | 9.92% | 15.91% |
| Poor (deep subprime): 300 to 500 | 12.99% | 19.85% |
Source: Experian’s State of the Automotive Finance Market Report — Q3 2021
Some lenders charge higher rates for used cars because you can’t take advantage of manufacturer deals, and because it’s difficult to determine the actual value. Used car buyers also default at a higher rate, causing some lenders to charge more in interest to make up for missed profits.
| Lender | APR | Loan amounts | Loan terms | |
|---|---|---|---|---|
| LightStream | Competitive | $5,000 to $100,000 | Varies | Read review |
| Carvana | 3.9% to 27.9% | Varies | Starting at 12 months | Read review |
| LendingTree | Starting at 0.99% | Not stated | Starting at 12 months | Read review |
| myAutoLoan | Starting at 1.89% | $8,000 to $100,000 | Up to 84 months | Read review |
| Ally Clearlane | 3.74% to 13.49% | Starting at $10,000 | Starting at 36 months | Read review |
| Bank of America | Starting at 2.09% | $5,000 to $100,000 | Starting at 12 months | Read review |
| PenFed | Starting at 1.79% | $500 to $100,000 | Up to 84 months | Read review |
| M&T Bank | 3.09% to 13.89% | Starting at $2,000 | Up to 84 months | Read review |
Although there are a wide variety of lenders with low starting rates, these are some of our best overall picks.
| Loan amount | $5,000 – $100,000 |
|---|---|
| APR | Competitive |
| Minimum credit score | Good to excellent credit |
| Loan amount | N/A |
|---|---|
| APR | 3.9% to 27.9% |
| Minimum credit score | No minimum credit score |
| Loan amount | N/A |
|---|---|
| APR | Starting at 0.99% |
| Minimum credit score | Good to excellent credit |
| Loan amount | $8,000 – $100,000 |
|---|---|
| APR | Starting at 1.89% |
| Minimum credit score | 550 |
| Loan amount | Starting from $10,000 |
|---|---|
| APR | 3.74% to 13.49% |
| Minimum credit score | 580 |
| Loan amount | $5,000 – $100,000 |
|---|---|
| APR | Starting at 2.29% |
| Minimum credit score | Varies |
| Loan amount | $500 – $100,000 |
|---|---|
| APR | Starting at 0.99% |
| Minimum credit score | Varies |
| Loan amount | Starting from $2,000 |
|---|---|
| APR | 3.09% to 13.89% |
We chose these lenders because their starting interest rates are lower than the average APR for new and used cars. And while some lenders like Carvana and myAutoLoan have higher maximum rates, we felt that they still offered a good deal overall.
Loan amounts and loan terms factored into our decision as well. And we considered other factors like rate discounts, preapproval periods and national availability to narrow down our options.
The interest rate you get can also depend on your car’s loan term. In fact, the average interest rate on a 60-month car loan from a commercial bank in the first quarter of 2021 was 5.21%, according to the Federal Reserve.
While some lenders may charge lower rates for a longer term, others like credit unions offer higher rates for longer terms.
The longer your loan term, the lower your monthly payment. However, it makes the total cost higher. For example, if you borrow $15,000 for a used car and your lender offers you a 10.5% interest rate, your monthly payments and total interest can vary greatly.
| Loan term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $487.54 | $2,551.32 |
| 48 months | $384.05 | $3,434.43 |
| 60 months | $322.41 | $4,344.51 |
| 72 months | $281.68 | $5,281.29 |
As you can see, your monthly payments are lower the longer you borrow, but you’ll end up paying about $1,000 more in interest each year your loan is outstanding.
Moreover, lenders generally charge lower interest rates for shorter loan terms. If you want to get the lowest rate possible, calculate your monthly car loan payments and interest charges based on different loan terms. This helps you determine the minimum term you can afford based on your interest rate to save money.
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.
By knowing your credit score before you shop for a loan, you’ll know what kind of rate you can expect. This allows you to go into the car-buying process with your eyes open and a realistic goal in mind.
Applying for multiple loans around the same time won’t hurt your credit, so you can apply for preapproval from multiple lenders without damaging your overall score. This makes it easier to compare rates and find a loan suitable for your needs.
When you compare your loans ahead of time, you can be preapproved — giving you the upper hand when negotiating with a salesperson.
Dealerships often offer rebates and reduced rates on certain vehicles, while lenders might offer loyalty discounts and rate reductions for using autopay.
Rather than focus on the monthly payment, concentrate on 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 loan term is best so you can handle the monthly payments.
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.
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.
Like most loans, car loans are notorious for their legalese. Understand how your interest is calculated and any potential fees you might be charged.
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. If your terms change, you could be left with a worse interest rate on your loan.
A cosigner not only lowers the risk for the lender, but it can result in a lower rate for you because your lender will consider the credit and income of both parties when reviewing your application, giving you a better chance of approval for a more affordable rate.
Dealership financing is often more expensive than borrowing from a third-party lender. But there are some situations where you can get a better deal, such as:
It’s possible, but it depends on your credit — and most deals are only available from manufacturers on new cars. Often, you’ll need nearly perfect credit to qualify, and it’s usually only available for certain makes and models.
Agreeing to a 0% APR auto loan may also mean foregoing other offers or promotions, like a manufacturer’s rebate. Ultimately, if you qualify, you’ll want to crunch the numbers to make sure it’s the best deal for you.
LEARN MORE: What dealerships don’t want you to know about 0% car loans
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 you compare car loans, 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 refinancing.
Our answers to more questions about interest rates on new and used car loans.
Will auto loan rates go down?
Interest rates on car loans fluctuate with the economy. Because of the COVID-19 pandemic, interest rates have lowered since 2019. But they’re bound to increase again as the economy recovers.
Am I better off taking out a loan for a longer term?
Not necessarily. While a longer term can lower your interest rate and your monthly payment, you’ll likely pay more in interest overall. Carefully weigh your ability to make monthly payments with the final cost of your car to determine the best term length.
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