Auto Loan Interest Rates Guide for Car Buyers
When you're looking to finance a new or used car, it’s useful to know the average interest rates others are getting. This helps you understand what rate you might receive and allows you to compare different loan offers more effectively.
Key Points
- Credit Score Impact: Your credit score plays a major role in determining your interest rate. A higher credit score generally earns a lower interest rate because it signals to lenders that you’re a lower-risk borrower.
- New vs. Used Cars: Interest rates on loans for used cars are generally higher than for new cars.
What’s the Difference Between Interest Rate and APR?
Interest Rate refers to the percentage you will pay yearly for borrowing the money.
APR (Annual Percentage Rate) includes the interest rate plus any additional fees charged by the lender.
Current Average Interest Rates
Based on data from Experian’s Automotive Finance Market report for the second quarter of 2024:
- New Cars: The overall average interest rate is 6.84%.
- Used Cars: The overall average interest rate is 12.01%.
Interest Rates by Credit Score Categories (Using VantageScore Model)
- Superprime (781-850): 5.25% for new cars, 7.13% for used cars.
- Prime (661-780): 6.87% for new cars, 9.36% for used cars.
- Nonprime (601-660): 9.83% for new cars, 13.92% for used cars.
- Subprime (501-600): 13.18% for new cars, 18.86% for used cars.
- Deep subprime (300-500): 15.77% for new cars, 21.55% for used cars.
Check out: Easy Ways to Snag a 0% Car Loan
Changes in Auto Loan Rates
Auto loan rates usually change in response to adjustments in the federal funds rate set by the Federal Reserve. The rate hikes starting from 2022 have brought the interest rates to high levels, but there might be decreases in the near future.
Sites like Edmunds.com have also reported recent interest rates: 7.1% APR for new cars and 11.2% APR for used cars as of September 2024.
Conclusion
Keeping an eye on these rates can give you a better idea of what you might expect to pay and help you find the best deal available.
Remember, comparing APRs rather than just interest rates can give you a more accurate sense of the cost of a car loan.
Debt Relief Options
Taking on a car loan can sometimes feel overwhelming, especially if you’re already navigating other financial responsibilities.
If you find yourself struggling with debt after purchasing your new vehicle, it’s important to know there are options available to help you regain control.
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