The current average interest rate for a new car loan is approximately 7.2% for borrowers with good credit, while used car loans average around 9.7%. These rates have increased significantly over the past year due to actions by the Federal Reserve to combat inflation. Your actual rate will depend heavily on your credit score, the loan term, the lender, and whether the vehicle is new or used. It's crucial to shop around with banks, credit unions, and online lenders, as pre-approval can give you significant negotiating power at the dealership.
The single most important factor determining your rate is your credit score. Lenders use this to assess risk. Generally, a higher score translates to a lower Annual Percentage Rate (APR). The following table illustrates typical rate ranges based on credit tiers for a 60-month loan, though these are averages and can fluctuate daily.
| Credit Score Tier | Average New Car APR | Average Used Car APR |
|---|
| Super Prime (781-850) | 5.6% | 7.0% |
| Prime (661-780) | 7.0% | 9.0% |
| Nonprime (601-660) | 9.8% | 14.5% |
| Subprime (501-600) | 12.8% | 19.5% |
| Deep Subprime (300-500) | 14.8% | 21.3% |
Beyond your credit, the loan term is critical. While a longer term (72 or 84 months) lowers your monthly payment, it almost always comes with a higher interest rate and means you'll pay more in total interest over the life of the loan. Opting for the shortest term you can comfortably afford is the most cost-effective strategy.
Finally, always check for manufacturer-sponsored incentives. Automakers often offer subsidized, low-rate financing—sometimes as low as 0% or 2.9%—on specific new models to boost sales. These deals are usually reserved for the most creditworthy buyers and can be far better than standard bank rates.
