Your car loan interest rate can add thousands of dollars to the total cost of a vehicle, or save you just as much, depending on where you land. With average new car loan rates sitting around 6.37% and used car rates averaging 11.26% as of Q4 2025, there’s a wide range of what borrowers actually pay, and your credit score is the single biggest factor driving that gap.
This guide covers current average auto loan rates by credit score tier, what actually moves your rate, how to qualify for a better deal, and when refinancing makes sense. The rate data comes from Experian’s most recent quarterly report, the gold standard for auto finance benchmarking.
Average Car Loan Interest Rates by Credit Score
Your credit score is one of the most important factors lenders use to determine your rate. The higher your score, the less risk you represent, and the lower your rate will be. The difference between a super prime and a deep subprime borrower is not just a few percentage points; it can mean paying tens of thousands of dollars more over the life of a loan.
Here are the average auto loan APRs based on Experian’s Q4 2025 data:
| Credit Score Range | Average APR (New Car) | Average APR (Used Car) |
|---|---|---|
| 781–850 (Super Prime) | 4.66% | 7.43% |
| 661–780 (Prime) | 6.37% | 9.83% |
| 601–660 (Near Prime) | 9.48% | 13.97% |
| 501–600 (Subprime) | 13.18% | 18.86% |
| 300–500 (Deep Subprime) | 16.01% | 21.55% |
Source: Experian State of the Automotive Finance Market, Q4 2025
These are national averages. Your actual rate will depend on your credit profile, the lender you choose, your loan term, and other factors. Keep in mind that used car loans almost always carry higher rates than new car loans, even for borrowers with excellent credit. Lenders view used vehicles as higher-risk collateral because they depreciate faster and are more likely to need repairs.
What Affects Your Auto Loan Interest Rate
Several factors determine the rate a lender will offer you. Some are in your control, and some are tied to broader economic conditions. Here is a breakdown of the main ones.
Your Credit Score
Your credit score is the starting point for almost every lending decision. Borrowers in the super prime tier (781-850) averaged just 4.66% on new car loans in Q4 2025, while deep subprime borrowers (300-500) averaged 16.01%. That spread of over 11 percentage points translates to a dramatically different monthly payment and total loan cost, even on the same vehicle at the same price.
Your Loan Term
Shorter loan terms generally come with lower interest rates. A 36-month loan will typically get you a better rate than a 72-month loan on the same vehicle. The tradeoff is a higher monthly payment, but you will pay significantly less in total interest over the life of the loan.
Your Down Payment
A larger down payment reduces the amount you need to borrow, which lowers the lender’s risk. That reduced risk often translates to a better rate. It also keeps you from going “upside down” on the loan, where you owe more than the car is worth.
New vs. Used Vehicle
Interest rates differ between new and used vehicles. New cars consistently carry lower average rates than used cars. In Q4 2025, the overall average for new car loans was 6.37% versus 11.26% for used car loans, according to Experian. The gap exists because new vehicles depreciate more predictably and carry less mechanical risk from the lender’s perspective.
Your Lender
Not all lenders price loans the same way. Credit unions typically offer lower rates than banks or dealerships due to their not-for-profit structure. Online lenders can also be competitive because of lower overhead costs. Dealership financing is convenient but tends to carry higher rates, since the dealer often marks up the lender’s rate as a source of income.
The Broader Economy
Auto loan rates move alongside Federal Reserve policy. When the Fed raises its benchmark rate, auto loan rates usually follow. After a period of aggressive rate hikes in 2022 and 2023, rates have been gradually declining.
Analysts at Bankrate project average new car loan rates will continue a modest downward trend through 2026, potentially landing near 6.7% for a 60-month loan by year’s end. However, ongoing uncertainty around Federal Reserve leadership and tariff policy could affect that trajectory.
One Tax Break Worth Knowing About
Congress passed a notable change that applies to auto loans. Under legislation signed in July 2025, borrowers can deduct up to $10,000 per year in auto loan interest on new vehicles assembled in the U.S., for tax years 2025 through 2028.
The deduction is available whether you itemize or take the standard deduction. It begins to phase out for individuals earning more than $100,000 (or $200,000 for joint filers) in modified adjusted gross income. If you are financing a qualifying vehicle, this deduction could meaningfully offset your borrowing costs.
How to Qualify for the Best Auto Loan Rate
Securing a lower rate is rarely a matter of luck. It comes down to preparation before you ever walk into a dealership. Here are the most effective moves you can make.
Work on Your Credit Score Before You Apply
Every credit tier you climb brings your rate down. Moving from near prime (601-660) to prime (661-780) on a new car loan could drop your rate by roughly 3 full percentage points based on current Experian averages, which on a $40,000 loan over 60 months translates to hundreds of dollars per year in savings.
The most effective ways to improve your credit score quickly are to pay down revolving balances to lower your credit utilization, make sure you have no missed payments, and dispute any errors on your credit report that may be dragging your score down unfairly.
Shop Multiple Lenders Before You Commit
Getting quotes from several lenders before you agree to any financing is one of the most straightforward ways to get the best auto loan. Consider these three categories:
- Banks: Often competitive if you have an existing relationship with the institution.
- Credit unions: Member-owned and not-for-profit, so they consistently offer some of the lowest rates in the market.
- Online lenders: Fast approvals, lower overhead, and often competitive rates, especially for borrowers with strong credit. Sites like Auto Credit Express act as a marketplace, gathering loan offers from various lenders based on the details you provide.
Get Preapproved Before You Shop
Walking into a dealership with a preapproval letter in hand changes your negotiating position entirely. You already know your budget, your rate, and your monthly payment range, which means you can focus on negotiating the vehicle price rather than the financing. It also means the dealer’s financing office cannot add hidden markup to the rate without losing your business.
Consider a Shorter Loan Term
While longer terms mean lower monthly payments, they also mean higher rates and more total interest paid. If your budget allows, choosing a 48 or 60-month loan over a 72 or 84-month loan will almost always get you a lower APR and a lower total cost.
Put More Down
A down payment of 20% or more is the traditional benchmark for a reason. It reduces the amount you borrow, shortens your path to positive equity, and demonstrates lower risk to the lender. Even an additional $2,000 to $3,000 down on a mid-priced vehicle can have a measurable impact on the rate you are offered.
When to Refinance Your Car Loan
Refinancing your car loan replaces your existing loan with a new one, ideally at a lower interest rate. It makes the most sense in a few specific situations.
Your credit score has improved significantly since you took out the original loan. If you financed a car when your credit was in poor shape and you have since rebuilt it, you may qualify for a rate that is several points lower now.
Market rates have dropped since you financed. If you locked in a rate at the peak of the rate cycle in 2023 or early 2024, refinancing now could reduce your monthly payment and your total interest costs.
You need to lower your monthly payment. Refinancing into a longer term can reduce your payment, though keep in mind it may increase the total interest you pay over the life of the loan. Run the numbers before deciding if it makes sense for your situation.
One thing to watch: some lenders charge origination or prepayment fees. Make sure the savings from refinancing outweigh any upfront costs. Also, if you owe more on the vehicle than it is currently worth, most lenders will not approve a refinance.
Tools to Help You Compare Rates and Estimate Payments
Before you start shopping, a few resources can help you go in with a clear picture of your numbers.
An auto loan calculator lets you input the loan amount, interest rate, and term length to estimate your monthly payment before you commit to anything. This is especially helpful for testing scenarios, such as what happens to your payment if you put an extra $3,000 down or choose a 48-month term instead of 60.
Rate comparison tools and preapproval platforms let you see offers from multiple lenders in one place without needing to submit a full application to each one. This makes it easier to compare APRs, loan terms, and eligibility side by side.
Monitoring your credit score before you apply is also worth the time. Many credit monitoring services will show you your current score along with the factors affecting it, giving you a roadmap for improvement if you have time before you need to finance.
Final Thoughts
The difference between a great auto loan rate and a bad one comes down to preparation. Knowing where your credit stands, shopping more than one lender, and getting preapproved before you step on a dealership lot are the three moves that will have the biggest impact on what rate you actually receive.
Rates have been gradually easing since their peak in 2023 and 2024, and analysts expect modest additional improvement through 2026. But whether rates drift down or hold steady, the most reliable way to get a lower rate will always be improving your own credit profile. Small improvements compound into real savings, especially on a loan you will be paying for five or six years.
Frequently Asked Questions
Can I get a car loan with bad credit?
Yes, but expect to pay a higher interest rate. Some lenders specialize in bad credit auto loans, but they may have stricter terms or require more money upfront. Checking your credit report for errors, paying off debts, and exploring online lenders can improve your chances of securing better financing.
See also: How to Buy a Car with Bad Credit
What interest rate can I expect with a low credit score?
If your credit score is below 600, current data puts average new car loan rates between 13% and 16%, and used car rates between 19% and 22%. The specific rate you are offered will also depend on your lender, your down payment, and the loan term you choose.
Which lenders offer the lowest car loan rates?
Credit unions tend to offer the lowest rates on average, followed by online lenders and then traditional banks. Dealership financing is generally the most expensive option because dealers often mark up the rate they receive from third-party lenders. Shopping multiple sources and comparing APRs, not just the monthly payment, is the best way to find the most competitive offer.
Does a cosigner help lower my interest rate?
Yes. A cosigner with strong credit can help you qualify for a significantly lower rate, since the lender is now evaluating two credit profiles instead of one. Keep in mind that the cosigner is equally responsible for the debt. If you miss payments, it affects their credit as well as yours.
