The average monthly car payment continues to rise, as does the loan term borrowers are choosing. Find out what this means for your own car loan — and how your credit score affects how much you pay each month.
However, how much you ultimately pay each month will depend on a variety of factors, including:
Down payment. Experts recommend making a down payment of around 10% to 20% of your car’s value. This limits how much you have to borrow, which can greatly reduce what you pay each month.
Loan amount. The amount you borrow will be how much you have to pay back. The larger your loan principal, the more your monthly payment will be.
APR. The interest and fees you pay on your loan. Borrowers with better credit will qualify for lower rates, reducing their monthly payments.
Loan term. The longer your loan term, the smaller your monthly payment will be — but you’ll pay more in interest overall.
New or used. New cars tend to have lower interest rates than used cars. The average rate for a new car in mid 2019 was 6.27%, while the average rate for a used car was 10.07%.
What does the average car loan look like?
The average car loan looked something like this as of mid 2019:
New cars
Used cars
Loan amount
$32,119
$20,156
Interest rate
6.27%
10.07%
Loan term
69 months
65 months
Monthly payment
$550
$392
Credit score
717
656
But this doesn’t tell the whole story. Two people can have the same payment despite having car loans that look nothing alike.
For example, these loans have the same monthly payment of $595, but the interest paid is over $5,000 more on the second loan.
Loan amount
Loan term
APR
Monthly payment
Total interest paid
$20,000
3 years
4.5%
$595
$1,418
$28,000
5 years
10%
$595
$7,695
How does my credit score affect my car payment?
Your credit score will play a role in the interest rate you receive on your car loan. And since interest affects your monthly payment, borrowers with better credit scores will typically receive lower rates.
While it looks like people spend about the same amount per month on their car payments, your borrowing power will be impacted with a lower credit score.
There may only be a $30 difference between the average monthly payments for super prime and deep subprime borrowers, but the latter are paying significantly more toward interest.
Credit score
Average new car monthly payment
Average used car mothly payment
Super prime — 781 to 850
$516
$383
Prime — 661 to 780
$559
$384
Nonprime — 601 to 660
$575
$394
Subprime — 501 to 600
$567
$408
Deep subprime — 300 to 500
$546
$411
When you’re ready to shop for a car, it’s important to pay attention to car loan interest rates in addition to the loan term. You’ll be able to afford much more car for the same amount of money when you have a higher score.
How does my loan term affect my car payment?
The longer your loan term, the lower your monthly payment will be. But it comes with one major downside: You’ll pay more in interest in the long run.
Let’s take a look at an example:
Loan amount
APR
Loan term
Monthly payment
Interest paid
$15,000
7.7%
3 years
$468
$1,847
$15,000
7.7%
5 years
$302
$3,120
Choosing a shorter term might make your monthly payment higher, but you’ll pay significantly less in interest over the life of your loan. We recommend picking the shortest term that comes with repayments you can comfortably afford to make each month.
While the average monthly payment for a new car is around $550, this doesn’t mean you’ll necessarily end up spending that much each month. Buying a less expensive car, making a larger down payment, improving your credit score or extending your loan term are all ways to help lower the monthly burden on your wallet.
Yes, many lenders offer preapproval for car loans that lets you see your potential interest rate and monthly payment.
Experts recommend no more than 15% of your budget should be dedicated to car-related expenses, including your monthly payment. To help figure out how much you should spend, see our breakdown of how to calculate your car-buying budget.
Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University.
If you’re in the market for a car don’t miss out on this guide to buy a car, get all the info you need and a range of loans to help you get into your car sooner.
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