Average car loan rates in August 2022

There is no doubt that buying a car is expensive. The average price of a new car is over $36,000 and a used car averages over $20,000. However, for many buyers, the price of a car does not tell everything about what it costs to buy it. Since most people take out a loan to buy a car, the interest rate on their car loan drives up the final cost of the car. In fact, the interest rate on an auto loan is usually the second most expensive part of buying a car. If you can get a good interest rate on your car loan, you can save thousands of dollars.

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See rates for new cars, used cars or refinancing. Get four offers to be ready before heading to the dealership.

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Credit score New car loan Used car loan Refinance a car loan

750 or more

7.88%

8.13%

4.01%

700-749

9.77%

10.02%

4.64%

600-699

14.43%

14.68%

6.72%

451-599

19.87%

20.12%

9.52%

450 or less

n / A

n / A

9.75

These rates were provided by our partner MyAutoloan. These rates are indicative only. Your individual car loan rate will vary.

Credit score New car loan Used car loan Refinance a car loan

750 or more

7.88%

8.13%

4.01%

A score of 750 or more is considered excellent credit. These borrowers are considered very low risk by lenders, so they receive less interest. If your credit score falls within this range, you may qualify for financing incentives and loans offered by automakers. These car deals can have financing as low as 0%, which can save you thousands of dollars.

Credit score New car loan Used car loan Refinance a car loan

700-749

9.77%

10.02%

4.64%

Lenders consider people with a score between 700 and 749 to be relatively low risk. However, while people in this range would typically be charged lower than average interest rates from banks, credit unions, and other lenders, they are unlikely to qualify for loan offers. zero percent financing of automakers.

Credit score New car loan Used car loan Refinance a car loan

600-699

14.43%

14.68%

6.72%

When your credit score is in the 600s, it starts to get expensive to borrow money. On the bright side, auto loan refinance rates are still relatively low for these borrowers. This means that if you buy a car with a high interest rate, you can refinance and save money once you’ve built up equity.

Credit score New car loan Used car loan Refinance a car loan

451-599

19.87%

20.12%

9.52%

People with poor credit are called subprime borrowers. Lenders consider people with subprime credit to be at a higher risk of defaulting on a loan. As a result, lenders charge these borrowers higher interest rates to protect against losses. Some lenders won’t even work with borrowers in this credit range. Learn more about buying a car with bad credit.

Credit score New car loan Used car loan Refinance a car loan

450 or less

n / A

n / A

9.75%

Deep subprime borrowers will likely find it difficult to find a lender for an auto loan, and when they do, they will pay extremely high interest rates. These high interest rates can add thousands of dollars to the overall price of a car and make monthly payments extremely high.

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Let’s take a look at the different auto loan rates above and see how they impact your bottom line. We’ll use a loan term of five years and a new car loan amount of $28,800 (the amount left to finance after a 20% down payment with a new car priced at $36,000).

Using the average interest rate for people with prime credit, 7.88%, that equals $6,138 in interest payments. People with good credit have an average interest rate of 9.77% this month, resulting in $7,720 in interest on this loan. Borrowers with fair credit have an average interest rate of 14.43% this month, and this loan would cost $11,794 in interest. At 19.87%, the average new car interest rate we found for people with poor credit, the total interest comes to $16,857. That’s over $10,700 in additional costs over what someone with great credit would pay.

Let’s take a look at a 60 month loan on a used car. We will use a loan of $16,000. Borrowers with prime credit and an average rate of 8.13% this month will pay interest of $3,525. People with good credit have an average rate of 10.02% this month, which translates to a total interest of $4,407. Borrowers with fair credit and an average interest rate of 14.68% would pay $6,677 in interest over the term of a five-year loan. Buyers with poor credit get an average interest rate of 20.12% and pay $9,498 in interest, almost $6,000 more than someone with great credit would pay in interest.

Car loan rates depend on two main factors: the borrowing interest rates set by the Federal Reserve and your credit score. When the Federal Reserve keeps interest rates low, borrowing money to buy a car tends to be cheaper.

After the rates set by the Federal Reserve, your credit score has the most impact on the car loan interest rate you will pay. If you have a good credit rating, you will qualify for a lower interest rate. When you finance a car, you borrow the amount you need to buy the car and the lender charges you interest. Interest is essentially rent on the money you borrow. This allows the lender to cover their expenses, make a profit, and get more of their money back if you fail to repay a loan. You can read more about how car financing works and see our guide to car loans and leasing for more details.

Lenders can show that, on average, people with low credit scores are less likely to repay the money they borrow. Factors that can contribute to a low credit score include factors like late payment of loans and other bills, high level of debt, or non-repayment of loans. All of these factors indicate that a borrower is having trouble managing their money.

Other factors that affect your auto loan rate are the type and term of the loan. Used car loans have a higher interest rate than new car loans because used cars have a lower resale value than new cars and used car values ​​are less predictable . If you default on a used car loan, the lending company will be left with a less valuable asset to sell. They charge more interest to protect themselves and get more of their money back if they default on the loan.

The term of the loan you seek also affects your interest rate. A longer loan term means lower monthly payments, but it also means that it will take you longer to repay the lender and the risk that you will not meet all your payments is higher. A higher interest rate helps them get more of their money back in case you don’t repay the loan.

The best way to lower your auto loan interest rate is to improve your credit score. It may take some time, but if you pay your bills on time and reduce your debt ratio, your credit score will improve. As you get a better credit score, you’ll qualify for better car loan rates and save money on your car purchase. Learn more about how to buy a car with bad credit for other ways to improve your credit score.

Once you have a better credit score, shop around for car loan rate quotes. By getting quotes from multiple lenders, you can choose the one that will save you the most money. You’ll also get an idea of ​​what you should be paying in interest before you go to the dealership. Car dealerships usually offer financing, but unless you know the rates you qualify for, you won’t know if the dealership is giving you a good or bad financing offer. Having finance offers in hand gives the dealership an interest rate to beat if they want your finance business.

Compare car loan rates

See rates for new cars, used cars or refinancing. Get four offers to be ready before heading to the dealership.

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You can also save on your car loan by choosing a shorter loan term or putting more money on your car, which reduces the amount of money you need to borrow.

If you can’t raise your credit score enough to get a better car loan rate by the time you need to buy a car, you can get a loan at a higher rate, make the payments, and work to refinance your car loan at a lower rate. rate later. While you’ll still spend more on interest than if you got the lower rate to begin with, you’ll likely pay less overall than if you kept the higher-interest loan for the full term.

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