Because car loans are secured by the vehicle you buy, you can expect lower interest rates, sometimes under 5%. Generally, you need strong personal finances to qualify for the most competitive rates — especially a good credit score of at least 670.
Here is the average APR you can expect broken down by credit score and eight of the top lenders that offer the best auto loan rates.
Average car loan interest rates
The average interest rate on a new car loan for a borrower with good credit is 4.60% as of December 2021. Your APR will depend on your credit score, loan term, debt-to-income (DTI) ratio and whether you’re buying a new or used car.
Why do new and used car loans have different rates?
Some lenders charge higher rates for used cars because you can’t take advantage of manufacturer deals, and because it’s difficult to determine the actual value. Used car buyers also default at a higher rate, causing some lenders to charge more in interest to make up for missed profits.
LightStream has some of the most competitive rates out there. And unlike many lenders, it offers same-day funding. But great rates mean you'll need good to excellent credit to qualify. Plus there's no preapproval process: Applying with LightStream will result in a hard pull of your credit — even if you aren't approved.
Loan amount
$5,000 – $100,000
APR
Competitive
Minimum credit score
Good to excellent credit
LightStream has some of the most competitive rates out there. And unlike many lenders, it offers same-day funding. But great rates mean you'll need good to excellent credit to qualify. Plus there's no preapproval process: Applying with LightStream will result in a hard pull of your credit — even if you aren't approved.
Carvana is an online dealership that offers a simple financing process for its used car inventory. Its interest rates start decently low at 3.9% — although they can reach a high 27.9%. You have up to 45 days to choose your car from Carvana's inventory, which is longer than many lenders offer.
Loan amount
Not stated
APR
3.9% to 27.9%
Minimum credit score
No minimum credit score
Carvana is an online dealership that offers a simple financing process for its used car inventory. Its interest rates start decently low at 3.9% — although they can reach a high 27.9%. You have up to 45 days to choose your car from Carvana's inventory, which is longer than many lenders offer.
LendingTree simplifies the search process. With one form, you can see what car loans you could qualify for — no matter what type of vehicle you want to finance. The lenders in its network offer rates as low as 1.99% and competitive terms. But if you don't have good to excellent credit, you may not qualify for a loan.
Loan amount
Not stated
APR
Starting at 1%
Minimum credit score
Good to excellent credit
LendingTree simplifies the search process. With one form, you can see what car loans you could qualify for — no matter what type of vehicle you want to finance. The lenders in its network offer rates as low as 1.99% and competitive terms. But if you don't have good to excellent credit, you may not qualify for a loan.
Like LendingTree, myAutoLoan.com is a connection service that uses your information to help you find a lender. It accepts borrowers with low credit, and its network of lenders are transparent about their rates. However, you have to borrow at least $8,000. And because it sends your information to multiple lenders, you may receive marketing materials even after you get a loan.
Loan amount
$8,000 – $100,000
APR
Starting at 2.15%
Minimum credit score
550
Like LendingTree, myAutoLoan.com is a connection service that uses your information to help you find a lender. It accepts borrowers with low credit, and its network of lenders are transparent about their rates. However, you have to borrow at least $8,000. And because it sends your information to multiple lenders, you may receive marketing materials even after you get a loan.
Pros
Transparent rates
Multiple car loan options
Low minimum credit score requirement of 550
Cons
High minimum loan amount of $8,000
Strict minimum income requirement
May receive marketing materials
Loan amount
$8,000 – $100,000
APR
Starting at 2.15%
Minimum credit score
550
Loan amount
$8,000 – $100,000
APR
Starting at 2.15%
Minimum credit score
550
Best for refinancing
Ally Clearlane
Ally Clearlane is a direct lender and a great choice for refinancing. You'll be able to change up your loan terms with competitive interest rates that max out at 22.49%. But it's been accused of poor customer service, and its website doesn't have much information about the process.
Loan amount
$7,500 – $99,999
APR
7.54% to 22.49%
Minimum credit score
520
Ally Clearlane is a direct lender and a great choice for refinancing. You'll be able to change up your loan terms with competitive interest rates that max out at 22.49%. But it's been accused of poor customer service, and its website doesn't have much information about the process.
Bank of America is one of the top banks out there with some of the lowest starting rates on new cars. It offers a wide variety of loans to suit every need. While you're generally stuck buying from its network of dealerships, Bank of America will finance private-party loans if they meet its set requirements.
Loan amount
$5,000 – $100,000
APR
Starting at 5.39%
Minimum credit score
Varies
Bank of America is one of the top banks out there with some of the lowest starting rates on new cars. It offers a wide variety of loans to suit every need. While you're generally stuck buying from its network of dealerships, Bank of America will finance private-party loans if they meet its set requirements.
Pros
Extremely low starting APR of 2.39%
Multiple car loan options
Large maximum loan amount of $100,000
Cons
Limited dealership network
Must have BofA bank account to apply for private-party purchase
PenFed is one of the larger credit unions out there — and that means you can take advantage of low rates. It only costs $5 to join, but you'll have to have an account for at least 90 days to apply for a car loan. Once you do, you can use its car-buying service or bring your preapproval to a dealership to snag a car worth up to $100,000.
Loan amount
$500 – $150,000
APR
Starting at 5.19%
Minimum credit score
Varies
PenFed is one of the larger credit unions out there — and that means you can take advantage of low rates. It only costs $5 to join, but you'll have to have an account for at least 90 days to apply for a car loan. Once you do, you can use its car-buying service or bring your preapproval to a dealership to snag a car worth up to $100,000.
M&T Bank is rare: It offers financing for RVs, boats, motorcycles and other leisure vehicles. Best of all, its interest rates and terms are clear — although the fees you might pay aren't easily found.
Loan amount
Starting from $2,000
APR
7.49% to 15.76%
M&T Bank is rare: It offers financing for RVs, boats, motorcycles and other leisure vehicles. Best of all, its interest rates and terms are clear — although the fees you might pay aren't easily found.
Pros
Low starting rates for boat and RV loans
APR discount for current customers
Long loan terms available
Cons
Limited state availability
Not all fees are transparent
Loan amount
Starting from $2,000
APR
7.49% to 15.76%
Loan term
Up to 7 years
Loan amount
Starting from $2,000
APR
7.49% to 15.76%
How we picked these lenders
We chose these lenders because their starting interest rates are lower than the average APR for new and used cars. And while some lenders like Carvana and myAutoLoan have higher maximum rates, we felt that they still offered a good deal overall.
Loan amounts and loan terms factored into our decision as well. And we considered other factors like rate discounts, preapproval periods and national availability to narrow down our options.
Interest rate by loan term
The interest rate you get can also depend on your car’s loan term. In fact, the average interest rate on a 60-month car loan from a commercial bank in the first quarter of 2021 was 5.21%, according to the Federal Reserve.
While some lenders may charge lower rates for a longer term, others like credit unions offer higher rates for longer terms.
How does loan term change the amount I pay?
The longer your loan term, the lower your monthly payment. However, it makes the total cost higher. For example, if you borrow $15,000 for a used car and your lender offers you a 10.5% interest rate, your monthly payments and total interest can vary greatly.
Loan term
Monthly payment
Total interest
36 months
$487.54
$2,551.32
48 months
$384.05
$3,434.43
60 months
$322.41
$4,344.51
72 months
$281.68
$5,281.29
As you can see, your monthly payments are lower the longer you borrow, but you’ll end up paying about $1,000 more in interest each year your loan is outstanding.
Moreover, lenders generally charge lower interest rates for shorter loan terms. If you want to get the lowest rate possible, calculate your monthly car loan payments and interest charges based on different loan terms. This helps you determine the minimum term you can afford based on your interest rate to save money.
9 tips to get the best rate on your car loan
Finding the best car loan interest rate involves preparing and plenty of research beforehand with a potential to save thousands of dollars. These tips should get you started on your journey to scoring a low rate on your next car loan.
1. Know your credit score
By knowing your credit score before you shop for a loan, you’ll know what kind of rate you can expect. This allows you to go into the car-buying process with your eyes open and a realistic goal in mind.
2. Compare rates from different lenders
Applying for multiple loans around the same time won’t hurt your credit, so you can apply for preapproval from multiple lenders without damaging your overall score. This makes it easier to compare rates and find a loan suitable for your needs.
3. Get preapproved before visiting the dealership
When you compare your loans ahead of time, you can be preapproved — giving you the upper hand when negotiating with a salesperson.
4. Look out for discounts
Dealerships often offer rebates and reduced rates on certain vehicles, while lenders might offer loyalty discounts and rate reductions for using autopay.
5. Focus on the overall cost
Rather than focus on the monthly payment, concentrate on the sale price and the price you’ll end up paying at the end of your loan. Once you have this number, it’s much easier to determine what loan term is best so you can handle the monthly payments.
6. Be willing to negotiate
No matter how good your credit score is, you likely won’t be offered the lowest interest rate right off the bat. Dealerships are hoping you don’t question your rate, so come prepared knowing your credit score and the average rate you can get.
7. Don’t jump on the first deal
Since your interest rate isn’t the only thing that impacts the final price of your car, spend the time determining how term length and vehicle cost change your budget. Most lenders offer a few days to decide on a loan and buy a car — you won’t be wasting time if you decide to take a moment to get your thoughts in order.
8. Check the fine print
Like most loans, car loans are notorious for their legalese. Understand how your interest is calculated and any potential fees you might be charged.
You’ll also want to confirm that your loan isn’t conditional when you visit a dealer. Conditional means “subject to change,” so your loan isn’t finalized when you drive off the lot. If your terms change, you could be left with a worse interest rate on your loan.
9. Apply with a cosigner
A cosigner not only lowers the risk for the lender, but it can result in a lower rate for you because your lender will consider the credit and income of both parties when reviewing your application, giving you a better chance of approval for a more affordable rate.
Dealer financing vs. car loan rates
Dealership financing is often more expensive than borrowing from a third-party lender. But there are some situations where you can get a better deal, such as:
When it offers 0% financing. Some dealerships offer financing as low as 0% — especially if they want to move certain models out of the lot.
When you have a preapproved loan. You can use your preapproved loan from another lender as leverage to get a better rate at the dealership.
When you want to negotiate. Even if you aren’t preapproved, dealerships are often flexible about rates and terms on their loans, unlike other car loan providers.
Can I really get a car loan with a 0% APR?
It’s possible, but it depends on your credit — and most deals are only available from manufacturers on new cars. Often, you’ll need nearly perfect credit to qualify, and it’s usually only available for certain makes and models.
Agreeing to a 0% APR auto loan may also mean foregoing other offers or promotions, like a manufacturer’s rebate. Ultimately, if you qualify, you’ll want to crunch the numbers to make sure it’s the best deal for you.
At the end of the day, you can lower the total price you pay for a new or used vehicle by ensuring you’ve found a good deal on your car loan interest rate. When you compare car loans, don’t forget to do your research on each part of the process. If you already have a car loan with a high interest rate and think you could qualify for a lower one, you may want to consider refinancing.
Our answers to more questions about interest rates on new and used car loans.
Will auto loan rates go down?
Interest rates on car loans fluctuate with the economy. Because of the COVID-19 pandemic, interest rates have lowered since 2019. But they’re bound to increase again as the economy recovers.
Am I better off taking out a loan for a longer term?
Not necessarily. While a longer term can lower your interest rate and your monthly payment, you’ll likely pay more in interest overall. Carefully weigh your ability to make monthly payments with the final cost of your car to determine the best term length.
Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University. See full bio
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