What is a good auto loan rate
What Is a Good Auto Loan Rate? A Guide to Finding Competitive Interest Rates
When financing a car, securing a good auto loan rate can save you thousands of dollars over the life of the loan. But what constitutes a "good" auto loan rate depends on factors such as your credit score, the type of vehicle you're buying, and current market trends. Here's everything you need to know about identifying and securing a favorable auto loan rate.
As of March 2025, average auto loan rates vary based on credit score and whether you're purchasing a new or used vehicle. Below are some benchmarks for what can be considered a "good" rate:
: The average interest rate is 7.2% APR, but borrowers with excellent credit (781–850) can secure rates as low as 5.08%12.
: The average interest rate is 11.3% APR, with top-tier borrowers receiving rates around 7.41%14.
For borrowers with good credit (661–780), rates typically range between 6.70% and 9.63% for new cars and used cars, respectively14.
1.
Your credit score is the most significant determinant of your interest rate:
Borrowers with excellent credit (781–850) qualify for the lowest rates.
Those with fair or poor credit (below 660) face significantly higher rates, sometimes exceeding 15% APR for new cars and 21% APR for used cars14.
2.
: Generally come with lower interest rates because they are less risky for lenders.
: Tend to have higher rates due to depreciation and uncertainty about resale value16.
3.
Shorter loan terms (36–60 months) often come with lower interest rates compared to longer terms (72–96 months). Longer terms increase lender risk, which is reflected in higher rates67.
4.
A larger down payment reduces the amount you need to borrow, which can help secure better loan terms and lower interest rates6.
1.
Compare offers from multiple lenders, including banks, credit unions, online lenders, and dealerships. For example:
Navy Federal Credit Union offers competitive rates starting at 4.09% for new cars and 4.99% for used cars on short-term loans7.
Online tools like prequalification calculators can help you estimate your potential rate without affecting your credit score.
2.
If your score is below prime levels (660), consider improving it before applying for a loan by:
Paying down existing debt.
Avoiding late payments.
Reducing your credit utilization ratio.
3.
Focus on negotiating not just the car price but also the loan terms, including interest rates and fees.
Auto loan rates are expected to decline throughout 2025 due to Federal Reserve rate cuts aimed at boosting affordability:
Forecasts suggest that average new car loan rates could fall below 6%, while used car loans may drop to around 10% by late 202535.
This trend offers hope for borrowers seeking more favorable financing conditions.
: Rates above 15% for new cars or 20% for used cars are considered high and should be avoided if possible6.
: While longer terms reduce monthly payments, they often result in higher total costs due to increased interest charges.
A "good" auto loan rate depends on your financial profile and market conditions, but generally falls below the average rates for your credit tier. By understanding how factors like credit score, vehicle type, and loan term impact your rate—and by shopping around—you can secure a competitive deal that fits your budget.
If you're considering financing a car in 2025, now may be an opportune time as interest rates are projected to decline further. Always compare offers carefully and aim for the lowest possible APR to minimize costs over the life of your loan.
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