In 2022, new car loan rates range from 2. 40% to 14. 76% while used car loan rates range from 3. 71% to 20. 99%. Your credit score determines which annual percentage rate (APR) is low and which is high.
This article will outline the criteria used by lenders to set APRs and provide advice for locating the most affordable auto loan rates. For more information on and a comparison of the leading lenders in the market, read our review of the top auto loan providers. Lending Partner Loan Term Min. APR Min. Credit Score Highlights.
What Determines Average Car Loan Interest Rates?
The most important factor that decides your car loan interest rates is your credit score. The better your score, the lower your APR will be. The best rates are reserved for those with credit scores above 800, but according to Equifax, any score above 670 makes you a “low-risk borrower” and opens the door to lower average auto loan rates.
See the table below for an idea of the typical auto loan rates you can anticipate based on your credit score. Based on data from the Experian State of the Auto Finance Market report for the second quarter of 2022, these describe average auto loan rates for new and used cars.
Average Car Loan Interest Rates By Credit Score
|Credit Score||Average New Car Loan APR||Average Used Car Loan APR|
|781 to 850||2.96%||3.68%|
|661 to 780||4.03%||5.53%|
|601 to 660||6.57%||10.33%|
|501 to 600||9.75%||16.85%|
|300 to 500||12.84%||20.43%|
You can see that rates change drastically by credit score. This has a significant impact on what you must repay as well. Let’s imagine that you borrowed $10,000 over 60 months to buy a new car. If your credit is excellent and you receive a rate of 2, 40 percent, you would pay an extra $622 in interest. In other words, at that interest rate, a $10,000 loan would cost $606 to obtain.
Let’s say you receive a rate of 6 and have a respectable score of 650. 70 percent. In this situation, you would additionally pay the loan’s interest of $1,796.
If you receive a fair credit score and an average auto loan rate of 10, 87 percent, you’d pay $3,007 in interest. And if you had a very high rate of 14. With a 76 percent interest rate, the $10,000 loan would cost you $4,170. Ouch.
However, your credit score isn’t the only determining factor. Rates are also impacted by your employment situation, income, and the type of vehicle you buy. Better auto loan rate offers will be made if you have a consistent source of income and buy a more recent model of car.
What Is A Good Auto Loan Interest Rate?
An excellent auto loan interest rate is anything below 4%. However, it might not be possible to locate a rate below 4% depending on your circumstances and credit score.
Credit Score And Car Loan Interest Rates Explained
Your credit score is a numerical representation of your credit history. Your credit score indicates to lenders whether you’ll likely make timely payments. Because lenders believe those with lower credit scores pose a higher risk of default or late payments, they end up paying higher interest rates.
On the other hand, those with higher credit scores pay higher interest rates because lenders do not view them as reliable borrowers. Life happens, and a past event on your credit report may be the reason you have a low score today. Unfortunately, only those with the highest scores are eligible for the lowest rates.
Here’s how Experian ranks credit score ranges:
Tips For Reducing Average Car Loan Rates
Improving your credit score is the best way to find lower average auto loan rates. This can be accomplished by keeping your credit card balances low and paying your bills on time. Paying your monthly payments in full can also help. Paying off debts you still owe or receiving collection letters will raise your credit score.
The advice above may not be applicable to everyone, especially for those with limited incomes who struggle to make minimum payments on their debts each month, and building your credit score can take time.
Other factors that can lower your auto loan rates include:
You might also try to pay off your loan in a shorter amount of time. While it’s possible that doing this won’t lower your loan’s interest rate, it will speed up the loan’s repayment and result in lower interest payments. However, be sure to read your loan contract language carefully. Prepayment penalties, which are additional fees levied by some lenders if you pay off your auto loan early,
Where To Find The Lowest Auto Loan Rates
The lenders that provide auto loans at the lowest rates are listed in the table below. However, not everyone qualifies for a loan provider’s low APRs, even though they may be offered. Individual loan terms vary, and no one lender is the best option for all drivers.
Some lenders, like PenFed, offer car buying services. This implies that you can buy a car and finance it all in one location. Additionally, some lenders provide both refinancing and purchase loans, while others only provide one of the two types of loans.
Best Auto Loan Rates
|Lender||Lowest Auto Loan Rate||Minimum Credit Score||Loan Amount|
|PenFed Credit Union||4.44%||610||$500 to $150,000|
|Autopay||2.99%||575||$2,500 to $100,000|
|Auto Approve||2.94%||600||$5,000 to $85,000|
|RateGenius||3.09%||640||$12,000 to $100,000|
|Tresl||2.49%||580||$5,000 to $100,000|
|Auto Credit Express||Varies by lender||300||Varies by lender|
Drivers with poor credit are unlikely to be eligible for the interest rates noted in the table above. If you have poor credit, try comparing offers from multiple lenders using a site such as AutoCreditExpress.com. This site also specializes in finding loans for borrowers with bad credit, so if you have trouble finding auto loan offers, it’s worth checking.
Make sure to only submit applications to auto lenders who allow you to prequalify without a hard credit check when comparing loans. Hard credit checks can hurt your credit score even further. Utilizing an auto loan calculator to estimate your payment and overall loan cost is a good first step.
How To Apply For An Auto Loan
When buying a car, you can apply for an auto loan online, at a financial institution, or at the dealership. After your loan has been preapproved, some lenders let you look through the inventory at participating dealerships. You might need to have a specific car in mind before applying because the majority of loan applications require information about vehicles.
Have the following data on hand when you apply for a car loan because it may be necessary to prequalify and will undoubtedly be required before you submit your formal loan application:
Although not necessary for prequalification, additional documentation, such as your driver’s license, pay stubs, and personal references, may be needed before you can secure your loan.
If you intend to have a cosigner on your loan, they will also need to provide the above information and documentation.
Average Interest Rate For Car Loan: Conclusion
The biggest influencer is your credit score, which is one of many variables that determine average interest rates for auto loans. Auto loan rates can change depending on your credit rating and whether you are purchasing a new or used car. We advise you to compare all of the providers before financing a car in order to get the best rates. Lending Partner Loan Term Min. APR Min. Credit Score Highlights.
Average Car Loan Rate: FAQ
Here are some typical queries about typical auto loan interest rates, along with responses:
When looking around for a car loan, a rate of 4 percent or less is regarded as favorable. Be aware that average loan rates for new versus used vehicles are marginally different.
The typical auto loan interest rate for a 750 credit score is about 3. 48 percent for new cars and 5. 49 percent for used cars. In comparison to the range that is available, both of these rates are excellent.
Yes, a good auto loan rate for brand-new cars is 3%. Given that lenders charge higher rates for used vehicles, it’s an even better rate for a car loan.
For a new car loan, 6% is a respectable rate. This rate typically requires credit scores of 600 or better. A credit score of 660 or higher is necessary to qualify for a used car loan at the excellent rate of 6%.
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What auto interest rate can I get with a 650 credit score?
650 credit score auto loan interest rates According to Experian data, the average auto loan rate for near-prime borrowers was 6. 07% on new vehicle financing and 9. 80% on used vehicle financing in Q4 2021.
Is a 650 credit score good to buy a car?
Is 650 a good credit score for a car loan? you may be wondering as you prepare to begin the car financing process. The answer isn’t a simple yes or no. A 650 may be deemed “Good” or just “Fair” depending on your lender, which can impact how smoothly your auto financing process goes.
What is a good interest rate for a car 2022?
The average auto loan interest rate is 5. 16% for new cars and 9. Experian’s State of the Automotive Finance Market report for the third quarter of 2022 states that the percentage for used cars is 34%. You’ll have the best chance of obtaining a rate for new cars below 4% with a credit score of at least 780.
What is a good credit score to buy a car in 2022?
Your ability to obtain a car loan depends in large part on your credit score. A FICO Auto Score is one of the specialized credit scores that some lenders use. To get a loan with a good interest rate, you typically need to have at least prime credit, which is a credit score of 661 or higher.