Current Interest Rates For Car Loans - We break down the numbers on car loan rates in America, breaking down data on tenure, credit scores, and other facts. We also analyze how these car loan rates have changed over time.
The national average interest rate on car loans in the United States is 5.27% for 60-month loans. For individual customers, however, rates vary based on credit scores, loan term, age of the vehicle being paid off, and other factors related to the lender's risk in providing the loan. Typically, the annual percentage rate (APR) of a car loan ranges from 3% to 10%.
Current Interest Rates For Car Loans
Consumers with high credit scores, 760 or higher, are considered loan applicants and can be approved for interest rates as low as 3%, while those with low scores are risky investments for lenders and often pay high interest rates, up to 20%. A score below 580 indicates a customer's poor financial history, which may include late monthly payments, defaults, or bankruptcy.
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People in this "subprime" category can end up paying car loan rates 5 or 10 times higher than the average consumer, especially for used cars or long-term loans. Subprime loans are sometimes offered to people who buy a car without credit.
Customers with excellent credit profiles pay a lower interest rate than the 60-month average of 4.21%, while those who need to improve their profile should expect to pay much higher rates. The average score for car loan buyers is 711.
When combined with other factors related to the applicant's loan application, including liquid capital, the value of the car, and the ability to repay the entire loan, the credit score tells the lenders the risk of giving the applicant a loan. From 300 to 850, FICO credit scores are calculated by reviewing credit payment history, outstanding debt, and how long a person has maintained a line of credit.
Most banks and credit unions offer payment plans ranging from 24 to 72 months, short-term loans usually have low interest rates. The average term of a car loan is 63 months, with 72 and 84 month loans becoming more common. However, the high annual interest rate of a long-term auto loan can result in high interest payments that leave borrowers "looking down," meaning they owe more on the car loan than the car is worth.
Average Car Loan Interest Rates By Credit Score
Here's a closer look at the interest rates on different loan terms for those with bad credit.
While long-term loans allow for a lower monthly payment, the extra months of added interest can eventually outweigh the benefit of their lower short-term costs, especially for a buyer buying a used, older car whose value will depreciate quickly.
72 and 84 month terms are also only available for larger loans or newer models.
For example, if paid over 48 months, a $25,000 loan at 4.5 percent interest would result in a monthly payment of $570 and a total cost of $27,364. If paid over 84 months at $348 of $29,190 in total, or more than $1,800 over 48 months. At higher interest rates, the difference between short-term and long-term payments will be even greater.
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Auto loan interest rates can vary widely depending on the type of lending institution, and choosing the right institution can help secure the lowest rates. The big banks are the biggest car loan lenders. Credit unions, however, tend to offer consumers the lowest APRs, and automakers offer attractive financing options for new cars.
Most banks that offer car loans offer the same 3% lower rates to the most qualified customers. However, there is wide variation between banks when it comes to the maximum APR allowed, with rates ranging from 6% to 25%. Banks offering high-quality loans will generally accept applicants with poor credit, while risk-averse lenders will not lend to applicants with scores below 600.
A typical large bank has certain criteria to qualify for a loan, including high mileage and age of the car, and a minimum loan amount.
Typically, credit unions offer loans at lower interest rates than banks, have more flexible payment schedules, and require minimum down payments (or none, in some cases). However, credit unions tend to offer loans only to their members, which are often limited to specific areas, academic or community organizations.
Auto Loan Rates For New & Used Cars From Macu
Auto manufacturers such as Ford, GM, and Honda also offer financing options for 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 car loans. Automakers offer APRs as low as 0 or 0.9% to compete with traditional lenders like banks and credit unions, while enticing consumers to buy a new car from a dealer instead of a new used car from another dealer. Low rates are limited to the most qualified customers with excellent credit profiles, and not all loan applicants will be approved for credit from automakers.
The average interest rate on car loans for used cars is much higher than for loans on new models. High used car prices mean a high risk of borrowing money on an older vehicle, which may be less reliable. Most banks won't finance used car loans beyond a certain age, such as 8 or 10 years, and older model loans typically carry much higher APRs. The big bank offers its customers a good loan interest rate as low as 2.99% for the purchase of a new model, but the minimum interest rate for the same loan for an old model from a private seller rises to 5.99%.
The average car loan taken out for a used car is much lower than for a new model, with consumers borrowing an average of $20,446 for used cars and $32,480 for new ones. However, warranties longer than 48 or 60 months are generally not allowed for used car models, as the risk of the car breaking down increases with age.
Auto loan rates are historically low due to the generally low interest rate environment. Over the past ten years, the average interest rate on a 48-month car loan from a commercial bank has dropped by more than 40%. This is largely due to the financial crisis of 2009, after interest rates were lowered to encourage consumers to stimulate the economy by spending on things like cars rather than saving.
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Corporate finance loans have historically come at lower rates than commercial bank loans. Major automakers have "debt finance" facilities (eg, Ford Finance, Chrysler Capital, GM Financial) that only lend to customers who buy the parent company's cars; this allows automakers to offer lower prices, since car purchases, rather than interest, are the automaker's main source of income.
To get an insurance quote over the phone, call: (855) 596-3655 | Agents are available 24 hours a day, 7 days a week! Refinancing your car loan can save you money on interest, lower your monthly payments, or possibly both.
Want to see how financing can affect your bottom line? Use our refinance calculator to compare your current loan with a new paid-off loan, easily compare rates and calculate your savings.
The interest rate on a car loan is what the lender charges you for the loan, usually expressed as an annual rate. The annual percentage rate (APR) of a car loan is the interest rate plus any additional fees (including maintenance fees, document fees, late fees, loan origination fees, title fees and/or loan fees).
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When you renew a car loan, you take out a new loan with a new rate and a new repayment period for the old loan. Refinancing has several options, each with different potential benefits:
The best time to refinance your car loan is when you want to save money by lowering the interest rate or increase your cash flow by extending the loan term and reducing the monthly payment. LendingClub requires that you make at least one payment on your current loan and that your loan term is longer than 24 months.
Your automatic repayment rate will depend on your credit profile and loan terms. You can check your auto refinance rate with LendingClub in minutes without affecting your credit score.
If you're just starting the car buying process and debating leasing versus buying, check out our article on important things to consider.
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Based on actual customer savings from October 2016 to May 2018. The average savings was $2,986 over the life of the loan.
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