The national average interest rate on auto loans in the United States is 5.27% on 60-month loans. For individual consumers, however, rates vary based on credit score, loan term, age of car being financed, and other factors relevant to a lender’s risk in offering a loan. Typically, the annual percentage rate of charge (APR) for car loans ranges from 3% to 10%.
Average auto loan rates by credit score
Consumers with high credit scores, 760 or higher, are considered prime loan applicants and may be approved for interest rates as low as 3%, while those with lower scores are riskier investments for lenders and usually pay higher interest rates, as high as 20%. Scores below 580 indicate a consumer’s poor financial history, which may include late monthly payments, defaults, or bankruptcy.
People in this “subprime” category can end up paying car loan rates 5 or 10 times higher than mainstream consumers receive, especially for used cars or longer-term loans. Subprime loans are sometimes offered to people buy a car without credit.
Consumers with excellent credit profiles typically pay interest rates below the 60-month average of 4.21%, while those whose credit profile needs improvement should expect to pay significantly higher rates. students. The median credit score of consumers who obtain auto loans is 711. Consumers in this range should expect to pay rates close to the average of 5.27%.
When combined with other factors relevant to an applicant’s auto loan application, including liquid capital, cost of the car, and overall ability to repay the loan amount, credit scores tell lenders the risk of granting a loan to an applicant. Ranging from 300 to 850, FICO credit scores are calculated by evaluating credit payment history, outstanding debt, and how long an individual has maintained a line of credit.
Average interest rates by length of term
Most banks and credit unions offer payment plans ranging from 24 to 72 months, with shorter term loans generally carrying lower interest rates. The typical term for car loans is 63 months, with 72 and 84 month loans becoming more common. However, the higher APRs of longer-term auto loans can result in excessive interest charges that leave borrowers “upside-down,” meaning they owe more on the auto loan than the car does actually cost.
Here’s a closer look at the average interest rates on different loan terms for those with the strongest credit.
| 36 months | 4.21% |
| 48 months | 4.31% |
| 60 months | 4.37% |
| 72 months | 4.45% |
While longer-term loans allow for a lower monthly payment, the additional months of accrued interest may ultimately outweigh the benefit of their lower short-term cost, especially for the consumer buying a used car. older, whose value will depreciate rapidly.
The terms of 72 and 84 months are also generally only available for larger loan amounts or for new models.
For example, when repaid over 48 months, a loan of $25,000 at an interest rate of 4.5% will result in monthly payments of $570 and a total cost of $27,364. When paid over 84 months in monthly installments of $348, that same loan at the same interest rate costs a total of $29,190, or more than $1,800 more than at 48 months. For higher interest rates, the difference between short and long term payments will be even greater.
Average auto loan rates by lender
Auto loan interest rates can vary widely depending on the type of institution lending money, and choosing the right institution can help secure the lowest rates. The big banks are the main car loan providers. Credit unions, however, tend to offer customers the lowest APRs, and automakers offer attractive financing options for new cars.
Banks and credit unions
Most banks that offer auto loans offer similar rates as low as 3% to the most qualified customers. However, there is wide variation between banks when it comes to the highest allowed APR, with maximum rates ranging from 6% to 25%. Banks that provide higher-rate loans will generally accept applicants with poorer credit, while more risk-averse lenders will not offer loans to applicants with scores below the mid-600s.
The typical large bank has specific eligibility criteria for loans, including a maximum mileage and age for cars, and a dollar minimum for loans.
Typically, credit unions provide loans at lower interest rates than banks, have more flexible payment schedules, and require lower minimum loans (or none, in some cases). However, credit unions tend to offer loans exclusively to their members, which is often limited to certain locations, professions or social associations.
| ally | 3.24% | 18.19% |
| CapitalOne | 3.99% | 13.98% |
| PenFed | 1.99% | 18% |
| NCP Bank | 2.79% | 14.99% |
Dealers
Automakers like Ford, GM, and Honda also offer loan financing options on new cars purchased from their dealerships. This type of financing is growing in popularity with new car buyers and accounts for about half of all auto loans. Automakers are offering base APRs as low as 0 or 0.9% to compete with traditional financiers like banks and credit unions, while enticing customers to buy a new car from the dealer lot rather than a new one. used vehicle from another supplier. Low rates are limited to the most qualified customers with excellent credit profiles, and not all loan applicants will be approved to receive credit from automakers.
How Average Interest Rates Vary for New and Used Vehicle Loans
Average interest rates on car loans for used cars are generally higher than for loans on new models. Higher rates for used cars reflect the higher risk of lending money for an older, potentially less reliable vehicle. Many banks won’t fund loans for used cars beyond a certain age, like 8 or 10 years, and loans for older models that are permitted often carry much higher APRs. A major bank offers its customers good loan interest rates as low as 2.99% for the purchase of a new model, but the minimum interest rate for the same loan on an old model from a private seller goes up to 5.99%.
The typical auto loan taken out for a used car is significantly lower than for a new model, with consumers borrowing an average of $20,446 for used cars and $32,480 for new ones. However, warrants longer than 48 or 60 months are generally not allowed for older used car models, as the potential risk of car breakdown increases with age.
Historical car loan rates
Auto loan rates are at historic lows due to a general low interest rate environment. Over the past decade, the average interest rate on a 48-month car loan from a commercial bank has fallen by more than 40%. This is largely the result of the 2009 financial crisis, after which interest rates were lowered to encourage consumers to stimulate the economy by spending on items like cars rather than saving.
Auto finance company loans have historically come at lower rates than commercial bank loans. Major automakers have “captive financial” arms (eg, Ford Finance, Chrysler Capital, GM Financial) that exclusively lend to consumers who buy the parent company’s cars; this allows automakers to offer lower rates, since the purchase of the car, rather than the interest, is the automaker’s main source of income.
* The Federal Reserve stopped publishing auto finance company interest rate data after 2011.
Sources
“Consumer Credit – G.19” Federal Reserve
Auto loans from US banks
Chase Auto Loan Calculator
myFICO Auto Loan Calculator
S&P Global Market Intelligence
