Whenever you make an opinion to buy your dream car you need to get ready financially and for that knowing the average car loan interest rate received by other recent car buyers is helpful. For Borrowers with a credit score similar to yours gives you an idea of what car loan interest rates to expect and a benchmark for comparing various loan offers
The car loan interest rate you receive is based on several factors that include your income, credit history and credit score. Your credit score is one of the most important factors in determining the car loan interest rate that you will be offered because lenders use it to analyze how likely you are to pay back the loan. The higher your credit score, the lower your car loan interest rate is likely to be.
Your overall loan cost is affected by your car loan interest rate for which you must shop around to find the best car loan rate and whether it is a good idea when buying a car.
Average car loan interest rate by credit score
Consumer credit reporting company Experian has released the average auto loan interest rate in its quarterly Automotive Finance Market report.
In the third quarter of 2023, the overall average auto loan interest rate was 7.03% for new cars and 11.35% for used cars.
Experian also provides average car loan APRs by credit score, based on the VantageScore credit scoring model.
Is the Car loan interest rate rising?
To make a note, when the Federal Reserve increases the federal funds rate, auto loan interest rates also increase. Fed rate hikes marking its beginning in 2022 have now pushed car loan interest rates to the peak level in years. Some sources provide average auto loan interest rates updated every month, so the rates are more recent, but they aren’t broken down by credit score.
This year in February, automotive site Edmunds.com listed the average car loan interest rate for January as 7.1% APR for new car loans and 11.6% APR for used car loans. Data company Cox Automotive provided the volume-weighted average rate of 9.75% for new cars and 14.13% for used cars in its Auto Market Report which was released on 23rd January this year.
How to use average car interest rates
If you are well aware of your credit score and the car loan interest rate that you might qualify for, you can use auto loan calculators available online. You just have to enter the rate and estimate the monthly xar payment for various loan terms.
Making use of the average for car loan interest rate is a helpful tool, but you will not get to know your actual interest rate until you apply for a loan and receive offers from the lenders. Several factors can affect your rate, including the length of the loan term and the time for which the vehicle has been used.
To get the best deal possible, explore rates with multiple lenders and make a comparison. Many lenders offer pre-qualification with a soft credit check giving you an idea of the rate that you might qualify for without making an impact on your credit score.
Average Auto Loan Interest Rates
- Annual percentage rates (APRs) include both the interest rate and the additional costs of auto loans. These are most advertised by lenders because of this reason.
- based on your credit score and what kind of auto loan you’re looking for, APRs range anywhere from 5.07% to 21.38%.
- Your payment history largely affects your credit score and what you owe. It is also determined by how many accounts you own and for how long.
- The interest rate of your loan is also determined by the age of your car and its current condition. Be it your loan term, your debt-to-income ratio, your loan-to-value ratio and more everything determines your car loan interest rate.
Current Car Loan Interest Rates
The average car loan interest rate currently is at 9.00%. Auto loan annual per cent rates or APRs are the most popular rates that are advertised on most auto loan sites. APRs include both your interest rate as well as the fees and other costs that come along. Several factors influence what APRs you get.
How To Get Lower Interest Rates on Your Auto Loan
If you’re looking for the best auto loan rates follow these tips:
- Get a discount; One of the most common discounts is for setting up automatic payments, which reduces your interest rate by as much as 0.5%.
- Get a co-signer; not everyone has a good credit score, so getting a friend or family member with a good credit score to co-sign a loan with you might help you get a lower rate.
- Look for a newer car; most lenders adjust their rates based on the age of the vehicle you own. Finding a newer car within your price range may get you better auto loan interest rates for your credit score.
- Increase your down payment; this reduces the LTV ratio on your auto loan by which you may get a better interest rate.
- Choose a shorter loan term; Loans with long terms have low monthly payments, but higher interest rates. If you are someone who can afford higher payments for a short loan term, you are more likely to get a lower interest rate and pay less interest over the lifetime of your loan.
- Raise your credit score; A higher credit score helps you get the best rates when you go to refinance your vehicle.
- Refinance later; a poor credit score leads you to get stuck on a high interest rate, and you may benefit from refinancing your auto loan in the future. To improve your credit score you can take the interest rate available to you at present and make timely payments so that you are in a better position with lenders.
Most lenders set car loan interest rates while keeping in mind the credit score. Your credit score plays the most influential role in determining your car loan interest rate while some other factors also affect the rates available to you. You have plenty of options for auto loans such as banks, credit unions, loan marketplaces, online lenders and car dealerships. It depends on your situation who offers you better rates than others.
Recommended Auto Loan Providers
No lender is offering the best rates for everyone. Some lenders offer car loan interest rates by credit score as compared to others. The only way to find out if you are offered the best auto loan rate for your credit score is by sourcing loan offers from several lenders and then comparing them.
myAutoloan and Auto Credit Express are highly recommended. myAutoloan
myAutoloan lets you source offers from lenders in one place which is beneficial and can help you find the best auto loan interest rates by credit score that too without struggling much. You do not have to reach out to lenders on your own. Borrowers having excellent credit scores start at 5.29% for new cars and 5.54% for used ones.
Frequently Asked Questions
What is a good interest rate for a car for 72 months?
An interest rate under 5% is a great rate for a 72-month car loan. Usually, the best loans are offered to borrowers with the best credit scores and payment histories.
Why are auto loans so high?
“One of the Fed’s core duties is to keep purchasing power in check, and they do it by raising interest rates”. This is quoted by Sarah Foster, the senior U.S. economy reporter at Bankrate. To achieve this goal, the Fed increased the rates 11 times since March 2022.
Can you negotiate an APR car?
Yes of course, just like the price of the vehicle, the interest rate can also be negotiated. The first-rate offered by the dealer to you may not be the lowest rate you qualify for. With dealer-arranged financing, the dealer collects information from you and then forwards that information to one or more prospective auto lenders.
Will it be better to buy a car in 2024?
Vehicle supply and financing options are likely to improve, Cox concluded that “2024 will be the best year for car buyers since the pandemic.” Every day the latest news, stories, and content on the financial topics that matter are published. This could be your daily guide to all things personal finance.
Is 7% a high-interest rate for a car?
The average auto loan interest rate for new cars in 2023’s third quarter was 7.03% — 11.35% for used cars and a minimum of 5% for new cars as per Experian’s State of the Automotive Finance Market report.
What Is an Auto Loan and How Does It Work?
An auto loan is an instalment loan which is either used to buy a new or a used car or to refinance an existing auto loan. Auto loans are usually secured. It means the vehicle serves as collateral for the loan. If you fail to make monthly car payments as agreed, the lender can seize the vehicle.
