The average interest rate for car loans by credit score, loan term and lender

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Interest rates on new and used auto loans differ significantly, regardless of your credit score.

  • According to experian, the average interest rate for new cars in the first quarter of 2022 was 4.07% and for used cars, the average interest rate was 8.62.
  • Interest rates are largely based on credit score, whether the car is new or used, and loan terms.
  • Average rates have dropped since the first quarter of 2021, from 4.15% for new cars and 8.82% for used cars.

The average auto loan rate for a new car in the first quarter of 2022 was 4.07%, while the typical used car loan had an interest rate of 8.62% experian's state of the automotive finance market.

That's down slightly from 4.15% for new car loans and 8.82% for used car loans during the same period last year.

Dealers calculate your interest rate based on many factors, including your credit score, the type of car you buy, and where you live. Auto loans can be found through a dealer or by obtaining pre-approvals from institutions you want to work with, such as banks, credit unions or independent lenders.

Experian's data shows that the two biggest factors in your auto loan interest rate are your credit score and whether you are buying a new or used car.

Average interest rates by credit score category for new and used car purchases

Category credit score average effective loan rate for new cars average effective loan rate for used cars
deep subprime (300 to 500) 14,76 % 20,99 %
subprime (501 to 600) 10,87 % 17,29 %
non-prime (601 to 660) 6,70 % 10,48 %
prime (661 to 780) 3,56 % 5,58 %
super prime (781 to 850) 2,40 % 3,71 %

Average monthly payment by credit score

The higher your credit score, the less it costs to borrow money

Credit scores are a numerical representation of your credit history. They act as a grade for your credit history ranging from 300 to 850 and include your borrowing, applications, repayment and a mix of credit types on your credit report. Companies use credit scores to determine how risky they think it is to lend to you.

A lower credit score makes borrowing more expensive. In the data above, the most favorable loan rates went to people with the best credit scores. Meanwhile, those with the lowest credit scores paid about 10 percentage points more for loans than those with the highest scores.

The interest rate also has a great influence on the monthly payment. Using bankrate's auto loan calculator, insider calculated how much a borrower paying the average interest rate would pay for the same 30.000 dollar car loan with a term of 48 months would pay:

Credit score category average effective loan rate for new cars average monthly payment for a new car
low subprime (300 to 500) 14,76 % $831
subprime (501 to 600) 10,87 % $773
non-prime (601 to 660) 6,70 % $714
prime (661 to 780) 3,56 % $671
super prime (781 to 850) 2,40 % $656

If the interest rate is the only factor that changes, a person with a credit score in the highest category pays $656 per month, while a person with a score in the lowest category pays $831 per month, or $175 more per month for the pays same car.

Average interest rates for used cars vs. New car

Buying secondhand could mean higher interest rates

Buying a new car can be more expensive overall than buying a used car. However, interest rates on new and used car loans differ significantly, regardless of your credit score. Based on experian data, insider calculated the difference between new and used interest rates. On average, used car financing costs about four percentage points more than new financing.

Credit score category interest rate for used and new cars, percentage points
deep subprime (300 to 500) 6,23 %
subprime (501 to 600) 6,42 %
non-prime (601 to 660) 3,78 %
prime (661 to 780) 2,02 %
super prime (781 to 850) 1,31 %

The gap between the additional cost of financing a used car shrinks as credit scores increase, but even with the best credit scores, financing a used car costs over 1% more than financing a new car.

Used cars are more expensive to finance because they pose a higher risk. Used cars often have a lower value and a higher chance of being totaled in an accident, which could cause the financing company to lose money. This risk is passed on in the form of higher interest rates regardless of the borrower's credit score.

Average interest rates by loan term

Loans under 60 months have lower interest rates for new cars

Loan terms can affect your interest rate. Generally, the longer the term, the higher the interest rate.

After 60 months, your loan will be considered higher risk, and the amount you pay on the loan will be even greater. The average 72-month auto loan rate is nearly 0.3% higher than the typical 36-month new car loan rate. This is because there is a correlation between longer loan terms and non-payment – lenders fear that borrowers with a long loan term will eventually not repay it in full. Above the 60-month mark, interest rates rise with each year added to the loan.

Data from S&P global for new car purchases with a 25.000 dollar loans show how much the average interest rate changes:

Loan term average interest rate
36-month new car loan 3.86% APR
new car loan 48 months 3.93 % annual percentage rate
60 months new car loan 4.03 % effective annual interest rate
72 months new car loan 4.12 % annual percentage rate

Data from S&P global for used car purchases with a 25.000 dollar loans show how much the average interest rate changes:

Loan term average interest rate
36 month used car loan 4.18% APR
48 month used car loan 4.22% APR
60 months used car loan 4.17 % effective annual interest rate
72 months used car loan 4.07 % effective annual interest rate

While there is a direct correlation between a longer term and a higher interest rate for new cars, this is not the case for used cars. It is unclear why these interest rates decline with longer repayment periods.

It's best to keep your car loan at 60 months or less, not only to save on interest, but also to prevent your loan from becoming worth more than your car, otherwise known as being "underwater". As cars get older, they lose value. It is not only a risk for you, but also for your lender, and this risk is reflected in your interest rate.

Average interest rates by lender

The lender you use makes a difference

When you start looking for car loans, you'll find that the lender you choose makes a difference. Here are the initial interest rates from several different lenders for new and used cars.

Lenders interest
bank of america bank of america car loan
german navy navy federal credit union auto loans
US bank car loans from the US bank
luminous flux lightstream car loan
clearlane from ally clearlane from ally bank car loan
PNC bank PNC car loans

Banks set their minimum interest rates for car loans independently, so it's important to shop around and compare offers to see what's best for you. Get pre-approvals from several different lenders and compare aprs and monthly payments to find the best deal for you.