Auto Loan Interest Rates Explained

Auto loan interest rates determine how much you’ll pay to finance a vehicle. Rates can vary widely based on your credit profile, the type of car you’re buying, and where you get the loan.

Credit score

Your credit score is one of the biggest factors affecting your auto loan interest rate. Higher scores usually qualify for lower rates, while lower scores can lead to higher borrowing costs.

New vs used vehicles

New cars often qualify for lower interest rates than used vehicles because they’re considered less risky by lenders. Used car loans may come with slightly higher rates and shorter terms.

Loan term length

Shorter loan terms typically offer lower interest rates but higher monthly payments. Longer terms reduce monthly payments but increase total interest paid.

Where you get your loan

Auto loan rates can vary depending on whether you borrow from a bank, credit union, online lender, or dealership. Comparing offers can help you secure better terms.

Market conditions

Broader economic conditions and benchmark interest rates can influence auto loan pricing. When rates rise overall, auto loan rates often follow.

How to get a better auto loan rate

• Improve your credit score before applying
• Make a larger down payment
• Choose a shorter loan term
• Shop around and compare multiple offers