The average auto loan interest rates across all credit profiles range from 5. 64% to 14. 78% for new cars and 7. 66% to 21. 55% for used cars. Enter ZIP Code.
The interest rates you are offered for auto loans are determined by a number of factors, the most significant of which is your credit score. Understanding typical auto loan interest rates can help you determine whether you would receive a favorable rate on your loan and can also give you an idea of what you might be eligible for.
The MarketWatch Guides team will analyze auto loan interest rates for both new and used cars by state, vehicle type, and credit score in this article. We’ll also go into more detail about how auto loans operate and where to look for the best rates that fit your credit situation.
The MarketWatch Guides Team is dedicated to giving you trustworthy information so you can choose the best financing option for your car. Since customers depend on us to deliver unbiased and precise information, we developed an extensive rating system to create our lists of the top auto loan providers. In order to rank the loan providers according to a variety of criteria, we gathered information on dozens of them. Following 300 hours of investigation, each provider received an overall rating; the top-ranked businesses were those with the highest points.
Buying a car is a significant investment, and securing the right financing can make a big difference in your overall cost. While a 3.9% interest rate might seem appealing at first glance, it’s crucial to understand the nuances of car loan rates and how they relate to your specific circumstances.
Factors Influencing Car Loan Rates:
Several factors influence the interest rate you’ll receive on your car loan, including:
- Credit Score: Your credit score is the most significant factor, with higher scores typically qualifying for lower interest rates.
- Loan Term: Longer loan terms usually result in lower monthly payments but higher overall interest costs.
- Down Payment: Making a larger down payment can lower your interest rate by reducing the loan amount.
- Debt-to-Income Ratio: Your DTI ratio reflects the percentage of your income allocated towards debt payments. A lower DTI ratio can improve your chances of securing a favorable interest rate.
- Vehicle Age and Condition: Older or higher-mileage vehicles often come with higher interest rates due to increased risk.
- Market Rates: The prevailing market interest rates can also impact the rate you receive.
Analyzing Your Credit Score:
To determine if 3. While 9% is a good rate for you, it’s important to take your credit score into account. Here’s a breakdown of average car loan rates based on credit score ranges:
- Credit Score Range (FICO) | Average New Car Loan Rate | Average Used Car Loan Rate
- — | — | —
- 781-850 | 5.64% | 7.66%
- 661-780 | 7.01% | 9.73%
- 601-660 | 9.60% | 14.12%
- 501-600 | 12.28% | 18.89%
- 300-500 | 14.78% | 21.55%
Comparing Your Rate:
If your credit score falls within the 781-850 range, a 3.9% interest rate is considered excellent. However, if your score is lower, you might be able to find better rates elsewhere. It’s always advisable to compare offers from multiple lenders before making a decision.
Additional Considerations:
Think about things like loan terms, fees, and prepayment options in addition to the interest rate. If a lower interest rate is accompanied by a longer loan term or significant fees, it might not be the best option.
While a 3.9% car loan rate can be a good deal depending on your credit score it’s crucial to compare offers and consider all relevant factors before making a final decision. By understanding the factors influencing car loan rates and analyzing your individual circumstances, you can secure the best financing for your needs.
Remember:
- Always shop around and compare offers from multiple lenders.
- Consider your credit score and other factors that can impact your interest rate.
- Don’t solely focus on the interest rate; evaluate the overall loan terms and fees.
- Consult a financial advisor or loan expert for personalized guidance.
How To Get Lower Interest Rates on Your Auto Loan
If you’re looking for the best auto loan rates, these tips may help:
- Boost your down payment: A larger down payment lowers the loan-to-value ratio on your vehicle, potentially resulting in a better interest rate.
- Receive a discount: In the car finance sector, one of the most popular discounts is for setting up automatic payments, which can lower your interest rate by up to 0%. 5%.
- Obtain a co-signer: If your credit is poor, you may be able to obtain a lower interest rate by having a friend or relative with excellent credit co-sign a loan with you.
- Go for a newer vehicle: Most lenders base their interest rates on the age of the vehicle. You might be able to obtain better auto loan interest rates for your credit score if you can locate a newer vehicle in your price range.
- Select a shorter loan duration: Although longer loan terms typically have higher interest rates, they also have lower monthly payments. A shorter loan term will probably result in a lower interest rate and lower total interest paid over the course of the loan if you can afford the higher payments that accompany it.
- Boost your credit score: When you refinance your car, a higher credit score will enable you to receive the best deals. Later on, we’ll go over specific steps to take in order to achieve this.
- Refinance later: You might gain from refinancing your auto loan in the future if your bad credit has left you with a high interest rate. By taking advantage of the current interest rate and paying your bills on time, you can raise your credit score and eventually gain favor with lenders.
Source: Capital One
Current Car Loan Interest Rates
The average car loan interest rate currently is 9. 56%. The most prevalent rates you’ll see advertised on auto loan websites are auto loan annual percent rates, or APRs. APRs include your interest rate along with the fees and other costs that come with the loan.
There are a range of factors that can influence what APRs you get. Below we’ll detail average car loan rates by credit score, state and vehicle type.
Car Loan Interest Rates Explained (For Beginners)
FAQ
Is 6.9% a good interest rate for a car loan?
Is 3.5% a good rate for a car loan?
Is 3% interest rate good for a car?
What is considered a good auto loan rate?
|
FICO Score
|
Average new car rate
|
Average used car rate
|
|
781 to 850 (super prime)
|
5.64%
|
7.66%
|
|
661 to 780 (prime)
|
7.01%
|
9.73%
|
|
601 to 660 (near prime)
|
9.60%
|
14.12%
|
|
501 to 600 (subprime)
|
12.28%
|
18.89%
|