Average Auto Loan Interest Rates by Credit Score (2022)


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In 2022, new car loan rates range from 2.40% to 14.76% while used car loan rates range from 3.71% to 20.99%. The difference between a low and high annual percentage rate (APR) is largely based on your credit score.

This article explains the factors that determine how lenders set APRs and offers tips for finding the lowest auto loan rates. Also read our opinion on the best auto loan suppliers to know and compare the best lenders in the sector.

What determines average car loan interest rates?

The most important factor that determines your car loan interest rates is your credit score. The better your score, the lower your APR will be. The best rates are reserved for those with credit scores above 800, but depending on Equifaxany score above 670 makes you a “low risk borrower” and opens the door to lower auto loan rates.

To give you an idea of ​​the average auto loan rates you can expect based on your credit score, see the chart below. These depict average car loan rates for new and used cars based on Q2 2022 information. Experian State of the car finance market report.

You can see that the rates change drastically depending on the credit score. It also affects what you pay back to a large extent. Let’s say you took out a $10,000 car loan with 60-month terms to buy a new vehicle. If you have excellent credit and get a rate of 2.40%, you will pay $622 in additional interest. In other words, it costs $606 to take out a $10,000 loan with this interest rate.

Now let’s say you have a decent score of 650 and get a rate of 6.70%. In this case, you would pay $1,796 in additional interest on top of the loan.

If a fair score gives you an average auto loan rate of 10.87%, you’ll pay $3,007 in interest. And if you had a very high rate of 14.76%, you would pay $4,170 in interest on the $10,000 loan. Ouch.

However, your credit score is not the only determining factor. Employment status, income and the type of vehicle you purchase also affect rates. Having a steady stream of income and buying a newer vehicle will result in better auto loan rate deals.

What is a good interest rate for a car loan?

Anything less than four percent is a great interest rate on car loans. However, depending on your situation and credit score, finding a rate below four percent may not be possible.

Credit Score and Auto Loan Interest Rates Explained

Your credit score summarizes your credit history as a number. For lenders, your score predicts the likelihood of you making payments on time. People with lower credit scores end up paying higher interest rates because lenders consider them to be at higher risk of late payment or default.

On the other hand, people with good credit scores find lower interest rates because lenders see them as good candidates to repay their loans. Life happens, and you may have a low score because of something that happened in the past on your credit report. Unfortunately, the lowest fares are only available to people with the highest scores.

Here’s how Experian ranks credit score ranges:

  • Super first: 781 to 850
  • Prime: 661 to 780
  • No prime: 601 to 660
  • Subprime: 501 to 600
  • Deep subprime: 300 to 500

Tips for Lowering Average Auto Loan Rates

The best way to lower the average auto loan rates you find is to improve your credit score. This can be done by paying your bills on time and keeping your credit card balances low. Paying your monthly installments in full can also help. Unpaid debts or collection notices can impact your credit score, so paying them off will improve your credit.

However, establishing your credit score can take time and the tips above may not be practical for everyone, especially those with limited incomes who find it difficult to pay minimum balances every year. month.

There are a few other things that can lower your auto loan rates:

  • Have someone co-sign: Many lenders allow you to ask another person to co-sign a loan. A co-signer with strong credit can lower your interest rates.
  • Buy a new car instead of a used one: Although new cars are more expensive, lenders generally offer lower auto loan rates for new car purchases.
  • Place a larger down payment: A larger down payment can reduce your interest rate and the time it takes to pay off your loan.

You might also consider trying to pay off your loan in a shorter time frame. Although this does not reduce the interest rate on your loan, it does mean that you will pay off your loan sooner and pay less interest. However, be sure to read the wording of your loan agreement carefully. Some lenders charge a prepayment penalty — an additional fee for paying off your auto loan too soon.

Where to find the lowest car loan rates

The table below shows the lenders that offer the lowest auto loan rates. However, just because a loan provider offers low APRs doesn’t mean everyone is eligible for that rate. Loan terms vary from person to person and there is no best lender for all drivers.

Some lenders, like PenFed, offer car buying services. This means you can buy a car and finance it all in one place. Also, some lenders offer both purchase and refinance loans, while others offer one or the other.

Drivers with poor credit are unlikely to qualify for the interest rates shown in the table above. If you have poor credit, try comparing offers from several lenders using a site such as AutoCreditExpress.com. This site also specializes in finding loans for borrowers with bad credit, so if you’re having trouble finding auto loan deals, it’s worth checking out.

When comparing loans, be sure to only submit applications to auto lenders that allow you to prequalify without rigorous credit checks. Rigorous credit checks can hurt your credit score even more. A good first step is to use an auto loan calculator to predict what your payment would be and the total cost of the loan.

How to apply for a car loan

You can apply for an auto loan online, at a financial institution, or at the dealership when buying a car. Some lenders allow you to browse inventory from participating dealers after your loan has been pre-approved. Since most loan applications require vehicle information, you may need to have a car in mind before applying.

When applying for a car loan, be sure to have the following information ready, as it may be required for prequalification and will almost certainly be required before submitting your formal loan application:

  • Personal data such as name, address and age
  • Social Security number
  • Gross annual income information
  • Vehicle information such as age, mileage and vehicle identification number (VIN)

Although not necessary during prequalification, before you can secure your loan, you may need additional documents such as your driver’s license, payslips and personal references.

If you plan to have someone co-sign your loan, that person will also need to provide the information and documents mentioned above.

Average interest rate for auto credit: conclusion

Average car loan interest rates are determined by a variety of factors, the most important being your credit score. Depending on your credit score and whether you are buying a used or new car, auto loan rates can vary. Before financing a car, we recommend that you consult all available suppliers in order to obtain the best possible rates.

Average auto loan rate: FAQ

Below are some frequently asked questions and their answers regarding average car loan interest rates:


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